After touring the new Tesla Inc (NASDAQ:TSLA) gigafactory in Reno, Baird analyst Ben Kallo is as bullish as ever on Tesla's stock. In a new note Monday, Kallo described ramping production that he believes will lead to capacity expansion and falling costs in the years ahead.

Kallo last visited the gigafactory in January, and he noted a discernible increase in activity since his previous tour.

Tesla expects to produce roughly 50 GWh of cells in 2018. According to Kallo, the gigafactory will be cranking out as much as 150 GWh of cells when it is operating at full capacity. That type of production should allow Tesla to maintain a cost advantage over its competitors for years to come, Kallo said. Today, he estimates that the factory is still only about 30 to 35 percent complete.

Despite another huge 80-percent gain this year, Kallo believes all the pieces are coming together to make Tesla stock an excellent long-term buy.

“TSLA remains a top pick with several catalysts upcoming, including increased Model 3 production and margin expansion, additional Model 3 reviews, Tesla Energy announcements, and the semitruck unveiling planned for October,” he wrote.

The mix shift from Model X to Model 3 in time will help improve Tesla’s capital management due to better supplier payment terms on the Model 3, Kallo said.

As more Model 3s are delivered, Kallo expects positive reviews and headlines will begin to surface in Q4 and help boost investor sentiment. Finally, Kallo believes the Tesla semi truck, which will reportedly have a range of up to 300 miles, will be a major disruptor in the trucking industry.

Baird maintains an Outperform rating and $411 price target for Tesla stock.

Related Link: Popular Index ETF Tops This Week's Short-Selling List