Baird Calls Tesla (TSLA) Top Growth in Class; Buy Ahead of Results

Baird analyst Ben Kallo reaffirms Buy rating and $338 price target on Tesla Motors (NASDAQ: TSLA), adjusting his 2016 fourth quarter and 2017 estimates upwards to reflect deliveries and increased confidence in the Model 3 production. According to the Baird analyst, investors should look past the integration of SolarCity, focus on the Model 3 execution and "Buy Ahead of Results." Furthermore, any short-term volatility or noise in the stock from the SolarCity acquisition, should be viewed as a buying opportunity, as 2016 fourth quarter results represent a "de-risking event."

Tesla stock has historically experienced substantial positive share movement in the six month preceding the roll-out of new vehicles, gaining 22% prior to the Model S launch in 2012 and 33% ahead of the Model X launch in 2015. Kallo expects the Model 3 to “outperform its competitors” and the Tesla Gigafactory will make the Model 3 a reality, creating a significant barrier for its competition. Also, the acquisition of SolarCity will allow Tesla to join the solar rooftop market and generate cross selling opportunities.

Kallo comments, "We expect updates on the Model 3 and Gigafactory production ramps on the call, which we believe will drive shares higher. We now model ~25k Model 3 deliveries in 2017 with more confidence TSLA can ramp production, although we do not expect specific Model 3 guidance. We expect less focus on the SCTY acquisition, although there may be short-term noise as expectations are calibrated. We believe the Q4 report is another de-risking event, and recommend investors own shares."

The Baird analyst goes on to say, "We believe several upcoming catalysts could drive the stock price higher. We think demand for the Model S will remain strong throughout 2016 in the U.S. and Europe. Additionally, TSLA has several significant milestones coming up over the next 18 months. Upcoming catalysts include:1) continued production ramp; 2) gross margin expansion; 3) gigafactory construction updates; 4) the start of Model 3 production; 5) Tesla Energy ramp; and 6) additional details about the Model 3 and potential introduction of the Model Y/additional products."

For an analyst ratings summary and ratings history on Tesla Motors click here. For more ratings news on Tesla Motors click here.

Shares of Tesla Motors closed at $262.08 yesterday.

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