What goes up must come down, right?

Investors rejected that thinking in the case of Tesla Motors (NASDAQ:TSLA). They bid the stock up even higher -- to near $160 -- after earnings were announced Wednesday. That spike was good enough for a 14% return on the day, and an extra $2.5 billion tacked on to Tesla's market capitalization. It also continued a dramatic recovery for a stock that began the year at $34 as one of the market's most hated investments.

Remember that it was just three months ago that Tesla's shares doubled in the days following its first-quarter report. Those results saw the company reach profitability for the first time, sell 5,000 of its Model S vehicles, and expand gross margin to 17 %.

This quarter it was déjà vu all over again. Tesla set a record sales figure in the second quarter of 5,150 Model S cars while boosting gross margin to 22 %. Better still, the company says it is on track to achieve its 25% profitability target for Q4 of this year. However, Tesla did not boost its outlook for total sales this year, keeping that target at 21,000 vehicles.

That sales figure is nowhere close to mass-market rivals. Ford (NYSE:F), for example, delivered 5.7 million vehicles to dealers last year. Toyota sold about 10 million vehicles worldwide in the last 12 months, including 2.5 million just in the U.S. Considering that Tesla, now worth $18 billion, is approaching one-third of Ford's market cap, it's understandable that many investors have growing concerns about the company's valuation.

But that's not to say that Tesla's detractors are looking at a sure thing with bearish bets, either. Tesla sees the potential for sales to spike next year as it expands into the European market, eyes opening its first store in China, and continues to boost production efficiencies. That last point is critical. Tesla was able to improve its production rate last quarter by 25%, from 400 cars per week to 500. It's clear from that bounce that the company has room to drive its per-unit costs lower as long as demand keeps growing at this healthy pace.

It may be unlikely that Tesla can quickly grow into its sky-high valuation. But given the chance for a dramatic expansion in profitability, I wouldn't bet against it either.