Tesla (TSLA) is the top 2017 stock pick, says Baird – energy storage is not priced into the stock and Model 3 could exceed expectations

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Baird analyst Ben Kallo is closing the year on a very positive note for Tesla. The analyst, who has been covering Tesla for the past 3 years, named the company’s stock his”top pick” for the next year. He believes ‘Tesla Energy’ is not currently priced into the stock and he sees potential for Tesla to beat expectations for the Model 3 in 2017.

Tesla started taking reservations for the Powerwall 2 last month and Kallo believes the sales have been accelerating (via streetinsider):

“We believe TSLA battery sales are accelerating, and we should see additional benefits from the battery production ramp coinciding with the launch of the Model 3. We recommend accumulating shares ahead of additional details being released about TSLA’s current battery costs and density metrics, and believe the upcoming Gigafactory tour on January 4 will be a positive catalyst for the stock.”

As we reported yesterday, we also believe the Gigafactory event will be informative about Tesla’s battery business – maybe not with solid figures on battery cost, but certainly with a better idea for the models made by analysts.

Tesla has yet to disclose the number of pre-orders it received for the Powerwall 2. When unveiling the first generation Powerwall in 2015, Tesla CEO Elon Musk confirmed that the company received 38,000 reservations within the first few days, but they were not requesting any deposit at the time. For Powerwall 2, people need to place a deposit and deliveries are starting a lot closer to the unveiling than for the first generation – making the reservations more serious.

Kallo believes that this part of Tesla’s business is not priced correctly into Tesla’s stock:

“We think the ramp of Tesla Energy and Model 3 production could exceed expectations during 2017, and believe the opportunity is not currently reflected in share prices,”

He rates Tesla’ stock an ‘Outperform’ with a price target of $338. The stock closed at $214 yesterday, but it is up to $217 in pre-market this morning following the release of Kallo’s note. The analyst has a good rating history on TSLA (via Tiprank):


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