A top Wall Street analyst expects Tesla to trade like it did after the Model S launch

Tesla is closing in on its all-time high on Monday, trading up 1.88% at $US364.59 a share after a pair of Wall Street analysts raised their price targets for the stock.

One of those Wall Street upgrades was from Baird Research’s Ben Kallo, who is the fifth best-rated Tesla analyst, according to Bloomberg.

In a research note sent out to clients on Monday, Kallo said he was lifting his price target from $US368 to $US411 a share as the firm remains “positive on TSLA’s long-term prospects, and think the vehicle’s introduction to the market will take several months and coincide with positive catalysts, such as vehicle reviews, production updates, and progress toward >20% gross margins.”

Kallo believes the Model 3, Tesla’s vehicle priced for the masses, will see a similar reception on Wall Street as the launch of the Model S luxury sedan. After trading lower for a handful of months following the Model S launch in June 2012, Tesla shares were up nearly 200% a year after the vehicle’s launch.

“Importantly, we expect performance following the introduction of the Model 3 will more closely mirror the Model S than the Model X; TSLA now has experience ramping production of vehicles (which should mitigate the risk of production delays, as seen with the X), designed the Model 3 for manufacturability, and has a production schedule which could limit costs and delays,” Kallo wrote.

Interestingly, the comments from Kallo are not that different from what Tesla CEO Elon Musk has been saying about the future growth potential of his company’s stock. “Tesla stock is obviously high based on past & present, but low if you believe in Tesla’s future,” he wrote in a tweet on July 17.

That was a follow-up to comments made by Musk just two days earlier, when he told Nevada Gov. Brian Sandoval at the National Governors Association summer meeting, “I’ve gone on record several times saying our stock price is higher than we have any right to deserve.”

“I find it quite tough when there are very high expectations,” Musk said. “I try to tamp down those expectations … The stock reflects a lot of optimism about where Tesla will be in the future.”

Those tweets were fired out two weeks before the launch of the Model 3. Since then, Tesla shares are up about 8% amid heavy demand for the vehicle. Tesla is set to raise $US1.8 billion through a bond sale as it ramps up production of the vehicle. That’s $US300 million more than the company originally sought because of overwhelming demand, according to IFR, a Thomson Reuters unit.

Tesla’s stock is up 70% in 2017.

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