NEW YORK (TheStreet) -- While the market has had a bumpy roll downhill the past few weeks, shares of Tesla (TSLA) - Get Report have gone up significantly and aren't far from 52-week highs. That should give investors good reason to stop and approach the shares cautiously, if at all.
They certainly won't see much encouragement from analysts to go along for the ride with the electric car manufacturer's stock. Whereas there were strong buys from eight analysts three months ago, according to Zacks Investment Research, only five feel that way now. The shift helped lead Zacks to issue an average rating of hold for the 16 analysts tracked by the research firm.
Indeed, that may be only the beginning of the amount of risk investors face by investing in Tesla. Its stock price is like no other in the auto industry. The current price has given the company a market capitalization of $34 billion. That's for a company that sold 32,000 cars last year and continues to rack up loses. By comparison, General Motors' (GM) - Get Report market capitalization is $48 billion -- a mere 40% more -- yet it sells 10 million cars annually worldwide and makes money doing it, too.
To be sure, Tesla makes a superb product, earning the highest car rating ever from Consumers Reports, and has incredible promise to grow in a huge market. Yet, the company has its work cut out for it to justify the lofty valuation.
Tesla is expected to unveil the Model X SUV on Tuesday.
It has to bring out a long-promised car for the middle class in the next couple of years. Tesla also has to start making money by raising sales into the millions of vehicles within a decade and slashing the cost of making its cars, particularly its costly battery pack, which the company said it will reduce in price by 60%. With expectations like these, everything pretty much has to go Tesla's way.
It may yet. Still, it's hard though to see in the current environment the best market for Tesla's expensive cars.
The global economy is soft. There's a huge need for infrastructure spending for charging stations, yet with gas prices the lowest they've been in years, many potential car buyers and taxpayers won't care as they are sticking with the internal combustion alternative.
Then there's competition. Audi and Porsche (which are owned by Volkswagen (VLKAY) ), GM, Apple (AAPL) - Get Report and Google (GOOGL) - Get Report are among the companies working at producing fully electric cars.
Talk that the big boys will swamp Tesla is just that, since its way ahead of the pack. However, investors wanting access to the electric car market definitely have their choice of much lower-priced and profitable companies to invest in.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.