Tesla has a long way to go before it justifies its current stock price, New York University finance professor Aswath Damodaran told CNBC on Thursday.
Damodaran, known as the "dean of valuation" for his company analyses, said the electric-auto maker would need to have revenues comparable to the Volkswagen Group in 10 years, margins similar to Apple's and make manufacturing investments "like no other manufacturing company has before."
"Can it pull it off? It's plausible," Damodaran said on "Squawk Alley."
The Volkswagen Group, with brands from namesake VW to Audi to Porsche to Lamborghini, recorded sales revenue of $255 billion in fiscal year 2018.
Tesla reported revenue of $24.6 billion in 2019.
Last month, as part of its fiscal first-quarter 2020 earnings release, Apple forecast Q2 gross margins between 38% and 39%.
Tesla, in its annual filing released Thursday, reported gross margins of 17% for 2019. It was 19% in both 2018 and 2017.
Shares of Tesla have been on a wild ride since the fall, raising questions about whether the stock has become detached from fundamentals and instead in a speculative bubble driven by short-sellers.
Shares are up more than 80% year to date and about 220% in the past six months. In early February, the stock hit an all-time high of $968.99 before falling back to the mid-$700s.
On Thursday, after Tesla announced it plans a $2 billion common stock offering, shares fell initially then rose 5% to around $807.
Damodaran complimented Tesla and its CEO, Elon Musk, for the decision to raise additional capital, arguing it was necessary in order to grow into its valuation.
"I'm glad they're finally acting according to that big story," Damodaran said. "They should raise a lot more money, because they will need it to make that story come true."
Damodaran had been invested in Tesla but sold his shares when the stock hit $640. At that point, he said he felt it had run up too much.
"People are pricing in the expectation that the story is going to come true," he said. "And there are lots of barriers along the way that the company has to overcome, and that would be my concern paying the current price."
Damodaran's relative caution toward Tesla stands in contrast to some of the company's most bullish analysts: Wedbush Securities' Dan Ives and Ark Investment Management's Catherine Wood.
For Tesla to justify additional moves to the upside, Damodaran said, it cannot simply be a car company.
"They've got to figure out a way that they become part-software, part-car," he said. "That is the only way you can get to those margins. ... There are people who believe strongly enough in that story that they're willing to invest at this price. I just think that's a bridge too far."