Checks Into Tesla's Fremont Factory 'Encouraging'

Pacific Crest's Brad Erickson gave some insight into a recent factory tour of a Tesla Motors Inc TSLA's Fremont, California facility. Following the tour and updated channel checks, Erickson said he is "more positive" on Tesla over the near term.

"In a tour led by VP of IR Jeff Evanson, commentary indicated that Model X production is ramping in line with Q2 expectations, and we found the tone incrementally more confident regarding potential further quality issues for X," Erickson said.

Although the Pacific Crest analyst noted optimism on Tesla could rise again, he said his Sector Weight rating has been predicated on a potentially concerning level of cash burn, as well as an "overly ambitious" plan set for 2018.

"While we think the stock's reaction after last quarter illustrated significant investor skepticism around the accelerated Model 3 production ramp, we believe shares could see further appreciation in the near term on improving sentiment and near-term targets appearing more readily achievable," according to the Pacific Crest note.

Tesla shares traded up about 1.4 percent to $235.56 Wednesday afternoon.