Tesla Still A Top Pick On Q2 Beat, Strong Model Reviews

Tesla IncTSLAsecond-quarter results Wednesday came in "better than we feared." The firm's Ben Kallo maintains an Outperform rating on Tesla's stock with an unchanged $368 price target. Among the biggest highlight of Tesla's earnings report includes the cash balance of more than $3 billion, which should be sufficient to fund growth, Kallo stated. Also, management's demand commentary around all car models were positive and highlighted by an acceleration in net orders for all vehicles through the Model 3 launch.

While investors do have reason to be concerned with demand pressure on the higher-priced Model S and Model X cars due to the Model 3 ramp, initial data "is encouraging," the analyst added. In fact, the setup remains favorable as Tesla will boast a lineup of cars that will give "better clarity around the right vehicle for individual needs" (see Kallo's track record here).

Looking forward, the future Model Y vehicle will use "substantial carry-over" from the Model 3, which will reduce time to market and development risk. Also, any future details on the Model Y vehicle will serve as a positive catalyst for the stock.

"We believe a positive reception to the Model 3 from early customers could significantly increase the value of the Tesla brand and further accelerate demand," the analyst concluded. "Importantly, early reviews are largely positive."

In Thursday's pre-market session, shares of Tesla were up 5.9 percent at $345.12.

Related Links: Model 3 Vs. Chevy Bolt: A Line-By-Line Comparison 10 Questions (And Answers) About Tesla's Model 3 _______ Image Credit: By Steve Jurvetson from Menlo Park, USA - Tesla Model 3 Charging, CC BY 2.0, via Wikimedia Commons