One stock is out of this world in 2020.
Virgin Galactic has rocketed nearly 200% higher this year, outpacing even Tesla's 105% rally for the honor of hottest stock on the market. The space tourism company made its public debut in late October.
"The stock price is just moving at a hypersonic pace," Mark Tepper, president of Strategic Wealth Partners, said on CNBC's "Trading Nation" on Tuesday. "Why has it gone from $10 to $32 over the last few months? They've generated no revenues to date, so right now even bulls are concerned about the price."
At its peak on Tuesday, Virgin traded at a record $38.72 a share. In Wednesday's premarket, shares resumed their climb, up 10% to $33.34.
"I see a stock that's trading in hype similar to Tesla, but without the revenues to back it up and then the stock goes up and shorts are getting crushed and that takes the price up even higher," said Tepper.
Tesla shares have had a similarly parabolic run. The stock is up 385% from its 52-week low in June. Shares have been up 32% just this month as investors grew more bullish on its outlook and a high number of short sellers were forced to cover their positions as the stock took off.
However, to Tepper's point, Tesla is expected to post $31 billion in sales in fiscal 2020, up 29% from a year earlier. Virgin Galactic is expected to post less than $7 million in sales this year.
"Fundamentally, it's very difficult to value something that's generating zero revenues. You're supposed to look at projections 10 years from today. I don't know how anyone can accurately predict that far in advance," said Tepper.
Bill Baruch, president of Blue Line Capital, says the charts are pointing to a pause in the rally here.
"It's overexuberance at its best. You're seeing this in other names right now, but really what matters most here … is this spinning top formation. The bulls pushed it higher, they ran out of fuel," Baruch said during the same segment.
A spinning top is formed on a candlestick chart when a single session's activity has a big swing between a high and a low and a compressed opening and closing price — the candlestick representing the day's moves resembles a toy top. Such a trading pattern implies investors are uncertain of future direction as sellers and buyers push against one another to leave the opening price near the price at the end of the day.
"After such a rally, seeing a spinning top here would usually open the door for consolidation or even a sharp move lower, so I'd expect a pullback somewhere in the ballpark of $20. If we get down to $20 I think there's decent support there. If you like this and find the case to buy it, that's where you want to be a buyer," said Baruch.
A decline to $20 implies 33% downside from Tuesday's close of $30.30. Its shares traded at that level as recently as last week.
