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Tesla, Inc. Stock “Not A Good Short” On Initial Impressions

Tesla Model 3 TSLA Autopilot NASDAQ:TSLA
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Tesla Inc (NASDAQ:TSLA) may be struggling with production hell at the moment, but that doesn’t mean it’s a good moment to bet against the firm. That’s the message Ben Kallo, who studies the EV maker for Baird Research, delivered on Monday morning in a new report. He’s pretty confident that the shares are set to go higher from here.

That’s not a foregone conclusion by traders. The median price target on Tesla stock sits at $4337 according to the Financial Times. That’s well below the price that the firm’s shares were set to open at on Monday morning.

Tesla stock gets $411 price target

Mr. Kallo is so enamored with progress on the Tesla Model 3 that he raised his price target on the firm’s stock to $411. That’s up from his previous target of $386. On Friday afternoon the shares closed at a price of $357.87.

Tesla Model 3 Design. Source: Tesla Motors
Tesla Model 3 Design. Source: Tesla Motors

In Kallo’s view the initial impression of the Model 3 is the key driver. “A positive reception to the Model 3 from early customers could significantly increase the value of the Tesla Brand and further accelerate demand,” he wrote.

Because he believes that the impressions will continue to be good, the analyst warns against betting against Tesla stock. Kallo says, “TSLA is not a good short headed into the Model 3 ramp as we continue to believe upcoming catalysts will drive shares higher.”

Mr. Kallo’s price target is currently on the high side of Wall Street, but his is far from the top forecast. That honor belongs to Alexander Haissl of Berenberg Bank. In his June report, he more than doubled his price target to $464.

Catching Tesla catalysts

One big problem for those trading Tesla stock is the lack of obvious catalysts. The real thing that stock buyers care about is the Model 3 delivery schedule. The firm’s aggressive production ramp up is the most important factor in deciding its profit and earnings. The problem is that we’re not likely to get much direct information on deliveries.

Tesla Inc Model 3 delivery date graph
The Tesla Inc production schedule for the Model 3

As the Tesla Model 3 gets on the road, we’ll start seeing more fleshed out reviews of the car. It’s really not clear when they’ll arrive, however. The first reviews from widely respected publications will likely have an outsized effect on perceptions.

After the reviews, the remaining catalysts get even wilder. The stock often trades on ideas about the future. That means that the most talked about story this fall might be the electric Tesla Inc (NASDAQ:TSLA) semi rather than the Model 3. Even though sales of a truck aren’t likely to take place for years, such an announcement could capture the minds of investors.

Kallo, and most of Wall Street, is fairly direct about the reception they expect the firm to receive. Though there are big risks around the firm, it’s clear that Wall Street has faith in the mission. That’s certainly a circumstance in which shorting is dangerous. We’ll just have to wait and see whether David Einhorn takes the advice.

Views expressed are those of the writers only. Past performance is no guarantee of future results. Trading comes with severe risk. The opinions expressed in this Site do not constitute investment advice and independent financial advice should be sought where appropriate. This website is free for you to use but we may receive commission from the companies we feature on this site.
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Adrian Smith

Adrian Smith is a finance and tech writer and currently working on a Masters in Business Information. He has developed a keen interest in all things finance and technology and loves to write about it.

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