'Don't be a bonehead,' buy Tesla shares: Analyst

"Bonehead" investors could miss a big opportunity by betting against electric carmaker Tesla and chief executive Elon Musk, according to brokerage firm Nomura Instinet.

Even though Tesla remains one of the most shorted stocks in the U.S. equity market, analysts Romit Shah and Kellan Grenier believe the company could rally to $500 per share over two years, more than 60 percent from its current $303 price.

"We believe that over the next three to six months the narrative on the company will shift from insolvency risk and cash burn to market opportunity and growth," the analysts said. They have created a chart that sets out a path to an approximately "$100 billion valuation within two years" fr the automaker.

Breaking down the analysts' bull case, Tesla would have to deliver 1 million autos with an average sale price of $60,000 over the next two years to reach the lofty goal. The analysts also forecast that Tesla could claim 10 percent of global luxury sales by 2022, saying the current top three brands (Mercedes-Benz, BMW and Audi) are "ripe for the picking."

While Shah and Grenier remain optimistic with a buy rating, it's likely a tall order for the Palo Alto, California company, which fell short of its weekly Model 3 production goal of 2,500 at the end of the last quarter.

The electric-car maker's stock is still down since January, partly on concerns over the company's ability to ramp up production of the Model 3, Tesla's first attempt at a mid-priced car. Seen by Wall Street as Tesla's key to unlocking revenue, anticipation over the Model 3 carried the stock to an all-time high of $389.61 in September.

Despite the miss, many investors were relieved by the numbers. Tesla produced nearly 35,000 vehicles in its first production quarter of 2018 — a fourfold increase over the previous quarter, the company said. Tesla expects output to climb rapidly and continues to target a production rate of 5,000 vehicles a week by the end of June.

With 31 percent of floating shares currently sold short, even a small jump higher in Tesla's stock price could trigger a so-called short squeeze.

When investors short a stock, they are betting it will go down by selling borrowed shares. However, it the price rises, many of those investors are forced to buy back those shares in hopes of avoiding even more losses. That new buying can, in turn, drive a stock even higher, a dynamic known as a short squeeze.

The latest production miss, though not as bad as many expected, drew probing questions from several analysts during Tesla's recent earnings call.

Musk, seemingly frustrated by what he characterized as a string of "boring, bonehead questions" from Wall Street, cut off RBC Capital Markets analyst Joseph Spak to take questions from Galileo Russell, a 25-year-old retail investor.

Spak later responded to Musk in a note to clients, assuring the chief executive he plans to "hold Tesla accountable" for its performance.

"Some of these questions can seem dry, boring or short-term focused, but hopefully you can appreciate that anyone looking to invest in Tesla's future must first be comfortable with its present," Spak wrote earlier this week.

For his part, Musk defended his unusual behavior last Friday, tweeting "The 'dry' questions were not asked by investors, but rather by two sell-side analysts who were trying to justify their Tesla short thesis."

Despite Musk's characterization of Spak and Bernstein analyst Toni Sacconaghi as short sellers, the two have hold ratings on Tesla's stock.