Tesla’s rally is far from over.
Shares are up 15% year-to-date, driven by the company’s announcement of its new battery business, and its confidence that it can start to deliver the new Model X SUV by the third quarter.
And in a note on Monday, Baird analysts note that investors are asking whether the rally is about to pause and if now is the time to sell.
But Baird’s Ben Kallo and Tyler Frank recommend they do quite the opposite, maintaining an “Outperform” rating and raising their price target to $US335 from $US275. This new price target is 35% higher than Friday’s closing price of $US249.14.
Here’s what the analysts wrote:
“Although sentiment has improved over the past three
months, we still believe there is a healthy level of scepticism surrounding Tesla Energy, the Model X launch, and demand — hence the opportunity… We like the setup of news flow which should help drive the stock higher and improve sentiment, which is still not overly positive (scepticism remains about demand, X timing, and TSLA Energy) … We think improved execution will continue to shift investor focus from the very short term to the longer-term opportunity and disruptive aspects of TSLA’s business.”
In their note, the analysts write that potential positive announcements at the upcoming shareholder meeting on Tuesday could also be a catalyst.
They wrote that there’s doubt around Tesla’s ability to meet its goals on the new Model X. However, it’s still a good idea to buy the stock ahead of the unveiling, as the market for premium SUVs continues to grow:
“We think a successful launch will provide several benefits to TSLA and its stock including (1) expanding its reach into one of the fastest-growing segments of the auto industry, (2) reinforcing confidence in its product development and design ability after an extremely positive reception of the Model S, and (3) increase both value and awareness of the Tesla Motors brand which should continue to drive awareness and adoption.”
Regarding Tesla Energy, the analysts write that investment in energy storage companies has been slow this year, and so Tesla already has a huge advantage: “We believe competitors will have difficulty in raising significant capital until their technologies are proven and sufficient market demand is seen to warrant a scale in production.”
Here’s a year-to-date chart of Tesla’s rally: