It's been a wild year for Tesla (TSLA -0.65%) stock. When the year started, shares initially surged more than 20%. But the stock has now given up all of those gains, with a year-to-date return of negative 1%. This means the stock has significantly underperformed the S&P 500's 18% gain this year.

But one analyst thinks the stock could take off.

Model 3 interior

Model 3. Image source: Tesla.

"We still really like this stock."

In February, Piper Sandler analyst Alexander Potter made a bold call, boosting his 12-month price target for the growth stock from $515 to $1,200. He said Tesla deliveries could increase from 500,000 vehicles in 2020 to nearly 900,000 this year. Of course, this projection was made before global supply shortages worsened. Nevertheless, Tesla is growing extremely rapidly. The company's second-quarter deliveries more than doubled compared to the year-ago quarter, rising to 201,304. 

Following Tesla's second-quarter earnings release late last month, the analyst reiterated this target, noting that the company looks poised to benefit from market share gains, the monetization of the company's Autopilot software, and "underappreciated opportunities" in Tesla's energy business, which includes revenue from battery energy storage and solar energy generation products. 

Further, Potter pointed to Tesla's strong second-quarter operating margin of 11%, which he expects will see incremental improvement from Tesla's recently launched Autopilot subscription. 

On Aug. 3, Potter once again reiterated an overweight rating on the stock and a $1,200 price target, saying "We still really like this stock." He pointed to growing demand for battery electric vehicles overall. 

So what gives?

If shares could truly rise to $1,200, why do so many investors seem to think the stock is worth so much less (based on the stock's price of just under $700 at the time of this writing). After all, if $1,200 was generally viewed by investors as a likely outcome for Tesla stock within the next 12 months, shares would be trading significantly higher today.

The issue boils down to the stock's forward-looking valuation. With a price-to-earnings ratio of about 370 at the time of this writing, Tesla shares are largely priced for strong growth for years to come. Since the company's valuation is based largely on profits far into the future, slight variances in views for Tesla's future growth trajectory yield dramatically different assumptions about the stock's intrinsic value today.

Investors, therefore, shouldn't be quick to buy Tesla stock just because one analyst has a high price target for shares. Still, Potter does notably have some good points about Tesla's strong business momentum. Even Tesla itself reiterated guidance for vehicle deliveries to grow more than 50% this year -- and that guidance was provided during a time that many companies around the world (including Tesla) are negatively impacted by supply chain shortages. Further, Tesla management noted in its second-quarter update that demand for its vehicles was at an all-time high going into Q3.

While a $1,200 price target for Tesla stock would be difficult to justify, shares may be trading low enough for investors to start a small position in the stock.