Baird Would Remain Buyers of Tesla (TSLA) Into Model X Launch

Baird analyst Ben Kallo reiterated an Outperform rating and $275 price target on Tesla Motors (NASDAQ: TSLA) noting factory improvement continue. The remain buyers of the stock into the Model X launch.

"We would be buyers of TSLA following our tour of the Fremont factory," Kallo said. "We are calibrating our model for lower gross margin in Q4 and 2016 to account for the Model X production ramp. We, however, left incrementally positive as TSLA continues to ramp Model S production, and commentary was bullish on demand in mature markets and Europe. We see significant upside as numbers are calibrated correctly and we like the Q1 setup. We would own the stock into 2016."

Kallo notes many changes are underway at the factory from their last tour in November. "TSLA continues to upgrade its battery packing equipment, finishing line, and paint shop, and its second manufacturing line is under construction, which should significantly boost production in 2H:14. Moving forward, TSLA should not have prolonged production stoppages for equipment upgrades, which was the primary driver of the Q3:14 miss."

The analyst said while Model X deliveries are still expected in Q3, they expect a meaningful delivery ramp to begin in Q4. "We model ~5,000 Model X deliveries in 2015, although deliveries will be heavily weighted to Q4. We are lowering our gross margin estimates for Q4:15 and 2016 to better reflect the expected short-term impact of ramping Model X production."

They think the stock works into the Model X launch and would be buyers at these levels.

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 $202.44 yesterday.

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