Is Tesla stock overpriced?

A Bank of America analyst predicted a 70-percent drop in the stock price for Tesla Motors. How likely is it that to happen?

Richard Vogel/AP
In this Saturday, Jan. 3, 2015 photo, shoppers check out the Tesla model S at the Tesla showroom at the the Third Street Promenade in Santa Monica, Calif. Tesla Motors Inc. reports quarterly financial results after the market closes on Wednesday, Feb. 11, 2015.

Many think that electric car company Tesla Motors that will shape the future of the auto industry. John Lovallo probably isn't one of them.

The analyst at Bank of America Merrill Lynch recently predicted an astronomical 70 percent drop in its stock price.

The numbers as they currently stand do not reflect Mr. Lovallo’s prediction. Shares of Tesla are currently about $203 each. That's a lot less than its $291 peak in September 2014, but still much, much more than in 2010, when shares were just $17, according to Yahoo Finance.

Bears frequently lurk around tech companies, making claims that drive the stock prices down and in turn make them a hefty return. In other words, Lovallo could stand to benefit. But he could also be right.

Lovallo's caution is catching on among Tesla's financial followers, as the company's CEO, Elon Musk, has been earning a reputation for bold predictions.

In 2014, Tesla’s fourth quarter earnings reports were lower than expected, as it only sold 1,400 when it predicted 35,000 sales, according to Business Insider. It was then that, to divert investors from Tesla’s poor performance, Musk claimed that Tesla would be worth more than Apple in the next decade

While the likelihood of Tesla surpassing Apple is still slim, financial analysts have been predicting the demise of Tesla since its conception, and so far they have all been wrong.

Tesla is good at adapting and changing its strategy. For example, currently Tesla is building a "Gigafactory" in Nevada where the company will work on developing stationary battery technology for its cars. Lovallo thinks this is a ploy to distract investors after a bad quarter, but according to analyst Trip Chowdhry, it could actually be worth $50 billion.

Tesla stock has dropped about $14 in the last five days but seems to be hovering around $205 per share for now.

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