Baird Sees 'String Of Positive Catalysts' Upcoming At Tesla

In a report published Monday, Baird analyst Ben Kallo reiterated an Outperform rating on shares of Tesla Motors Inc TSLA with a price target raised to $335 from a previous $275 ahead of a "string of positive catalysts." "Although sentiment has improved over the past three months, we still believe there is skepticism surrounding Tesla Energy, the Model X launch, and demand," Kallo wrote. "We think upcoming events will help improve sentiment and drive shares higher." Kallo continued that the upcoming "catalyst" events include Tesla's shareholder meeting (6/9), the company's second quarter delivery announcement (early July), the much anticipated and previously delayed Model X launch (third quarter) and the release of a Model 3 prototype (first half 2016). Given the line-up of events, the analyst recommended investors accumulate shares, rather than trimming positions to take advantage of the recent run-ups in shares. Kallo also discussed his thoughts on the Model X launch, noting that the new vehicle will expand Tesla's total addressable market, "reinforce" confidence in the company's product development competences, increase scale, and continue to build the brand. Finally, the analyst suggested that Tesla is "changing rules" with its move into energy storage. As such, Tesla Energy acted as a positive contributor to the recent stock move but there remains a lot of skepticism as well as misinformation. Kallo's $335 price target is derived on a 35x multiple on his 2020 earnings per share estimate of approximately $18 and discounted back at a 20 percent discount rate. The analyst argued the multiple and discount rate is appropriate based on Tesla's "technology, growth rate, ability to expand margin and other factors."