Tesla’s stock price is up almost 2% in pre-market trading this morning following a new note and “Outperform” rating from Baird financial analyst Ben Kallo. The analyst upgraded his rating on the automaker and increased his price target from $230 to $300 – the stock currently trades at ~$210.
Kallo recently visited Tesla’s factory in Fremont and in a note sent to clients, he commented:
“We believe investor skepticism has significantly increased since we downgraded TSLA on Oct. 6, and although we were concerned about the rate of Model X deliveries, recent data points show production is accelerating, which should drive deliveries and margin expansion throughout 2016. Additionally, we believe TSLA is ahead of expectations on reducing battery costs, and continues to have a significant lead on competing EVs. We would be buyers at current levels.”
We also recently reported on signs that Model X production is increasing: Tesla Model X ramp up accelerating, owners reporting having received VIN 5,000 and up.
More highlights from Kallo’s note via SteetInsider:
- Model X concerns are similar to the Model S introduction, although TSLA is a more mature company.
- We recently visited the factory and viewed dozens of Model Xs in production.
- We believe no capital raise will be needed in the next few quarters, and availability for bridge financing remains robust.
- Battery cost reductions are likely ahead of most estimates.
- High short interest sets up stock for potential catalysts of Model III introduction and Q1 deliveries announcement.
Short interest recently hit an all-time high on Tesla’s stock with 34 million shares. Last record was 32 million shares during the end of 2012 and early 2013. In an interview with FOX in September 2012, Musk warned that anyone holding a stock position against Tesla Motors will have a “tsunami of hurt” coming for them. During the 12 following months, Tesla’s stock price increased by 461%, a lot of which was attributed to a short squeeze after Tesla reported its first quarterly profit in Q1 2013.
A catalyst of similar magnitude, and Baird points to the unveiling of the Model 3, which is set for March 31st in Los Angeles, could potentially create another short squeeze.
Featured Image: Tesla logo at the Montreal store and service center by Fred Lambert
Note: For people not familiar with the term “short squeeze”, it’s a term used when demand for a stock increase while there’s a lack of supply due to short sellers (people betting against a stock) trying to cover their positions. It often results in a rapid increase in the price of the stock.