NEW YORK (TheStreet) -- During the ultimate valuation party of shareholder nirvana that took place while moons of Jupiter and the migratory patterns of birds were in perfect harmony, $250 shares in electric automaker Tesla Motors (TSLA - Get Report) danced on the bloodied faces of short-sellers.
For a brief moment during the party's climax, the shares actually exceeded $260. Not just once, but for two days the stock traded above $260 during each day's high. It was a memorable party, and for those holding invitations it was the party of a lifetime.
Unfortunately for shareholders, Tesla will probably never close above $260 again. Not in today's dollars anyway. Righ now shares are trading around $186, up nearly 24% for the year to date and nearly 120% for the past 52 weeks.
As much fun as the first party was, and short-sellers aside, the road trip to new 52-week highs isn't on the map or GPS. Don't blame it on Tesla or Elon Musk -- they're doing their part to turn out fantastic vehicles. It's the market's fault.
Maybe "fault" is the wrong word to describe an efficient market. Some assume the market is perfectly efficient and a stock's market cap valuation is always correct. I can't say I blame people for believing in the efficient market hypothesis. After all, it's still taught in many universities.
In a nutshell, efficient market hypothesis disciples cling to the false notion that all available information is priced into any given stock and that at any given time will reflect the rational and logical discounted price based on all other investment opportunities. The key words are "rational" and "logical."
A stock moves or trades on any given day based on emotion. Rationality and logic take a back seat for most stocks during the short term, and they're nowhere to be found with high-flying momentum stocks that are heavily shorted.
In other words, the most logical explanation of Tesla's rise above $100 is the absence of logic.
The Model S is a marvelous automobile and may be the safest electric or gas sled your money can buy. But as epic as Tesla is and reasonably can be expected to become, it's not enough to justify the stratospheric current market cap, let alone a catalyst for $260 again.
In contrast to General Motors (GM - Get Report) and Ford (F - Get Report), Tesla Motors is redefining the automobile industry. Tesla's Model S is the greatest combination since Reese's created its irresistibly addictive mix of peanut butter and chocolate.
Elon Musk, Tesla's A-list star CEO, combined the Corvette's sinus-draining torque through an electric-powered drivetrain with the sophistication and elegance of a Mercedes S-Class. Tesla's Model S range worries are debatable, albeit if the car can reach it, you'll arrive quickly and looking sharp.
What doesn't look as sharp is a portfolio with Tesla shares bought at unsustainable levels. Operationally, Tesla isn't profitable. The big print headlines you've read stating Tesla posted profits is based on non-GAAP numbers. Non-GAAP numbers exclude one-time costs that in one way or another accompany every quarter for every company.
It's a game the management teams and analysts play that's allowed by the Securities and Exchange Commission if the GAAP numbers are given greater exposure. Because the SEC knows the GAAP numbers are the true performance, it has a rule requiring GAAP numbers not get buried at the bottom with the small print.
Unfortunately for many smaller investors who may not fully understand the differences between the two, many in the financial media play fast and loose when reporting any given company's results.
Wall Street is expecting Tesla to drive about $3.17 (non-GAAP) in profit during 2015. It's a fantasy number of course, because not all costs are accounted for, but we'll use it. The forward price-to-earnings ratio is about 60 right now. In order for the shares to reach $260 again, the market needs to price the P/E near 82.
For relevance, stocks that are above a 20 P/E historically underperform the overall market. Stocks above 50 almost always do. In order for the shares to reach above $260 again, market participants will need to subscribe to a bull thesis that includes rapid growth that no one, including the company is projecting.
There are few paths to sky-high P/E ratios, rapidly growing revenue, expanding markets, exuberance over the products. Tesla clearly has star power, but supply chain and price holds the company from growing at anywhere near a 50+ P/E may suggest, much less a 80 or more.
Meanwhile, relatively unloved Ford, GM and other automakers will continue to close the gap between Tesla vehicles and their own offerings. As it becomes obvious that future Tesla offerings will have real and serious competition for consumers, and it will before the Gigafactory is up an rolling, investors hoping for another all-time high will fully appreciate that price is what you pay, value is what you receive.
Tesla is a great company and the stock has tremendous value, albeit not $200 a share worth of value, much less $260.
At the time of publication, Weinstein had no positions in securities mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
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