Analyst Ben Kallo of Baird Equity named Tesla Motors Inc (NASDAQ:TSLA) as the top pick for 2017. Kallo forecasts that the production of Tesla Energy and Model 3 will exceed expectations. In a note, Kallo wrote, “We believe TSLA’s energy storage business and growth opportunity is not currently reflected in share prices.”
Why it’s the top pick?
Baird believes the battery sales are on rise, and the battery production ramp should give another boost to it. This coincides with the launch of the Model 3, which will hopefully sell next year for $35,000.
“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,” Kallo noted.
Tesla Motors Inc (NASDAQ:TSLA)’s Powerwall 2 offers a competitive pricing advantage on a per kilowatt basis, and this will help the EV firm immensely in growing its share of homes and small business customers, Kallo notes.
Tesla’s Q4 delivery number might create a short-term volatility, but Kallo expects the stock to go higher. Kallo expects Tesla to enter into a deal sometime in the first half of next year. This will help it get rid of an overhang on the stock.
Will Tesla hit delivery target?
After a slow start to the year resulting in an adjusted guidance, the carmaker managed to report a record-setting Q3 as the vehicle deliveries went up by 114% on YOY basis, and by 72% over Q2. For the first time since 2014, it happened that the firm was able to make a profit in the Q3. As a result of all these good and positive news, there are huge expectations set for the final quarter of the year.
At the start of the year, Tesla had plans of delivering between 80,000 and 90,000 cars in 2016. The ramp up in the Model X production in the first half of the year was slower than expected. Because of this, the EV firm lowered its overall guidance at the end of Q3 to 79,000 cars.
Tesla needs to deliver 25,000 vehicles or more this quarter to meet that guidance, notes Teslarati. Financial analyst Daniel Sparks of the Motley Fool says the Model S sales will determine if the EV firm is able to meet that guidance or not.
Buyers got several incentives from the firm this quarter that includes the $1,000 discount via a continuation of its referral program. Also, the buyers who place an order for a new Model S or Model X by the end of the year will get free unlimited Supercharger access. Tesla Motors Inc (NASDAQ:TSLA) will be hoping that these incentives will lure enough buyers to help it hit the delivery target.
Year to date, the stock is down almost 11% compared to a gain of 10% by the S&P 500.
This article is not intended as individual or reader-specific investment advice. Do your own research and consult a financial professional, if necessary, before investing in anything.