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Tesla Motors Inc (TSLA) Baird Says “Own Shares into the Model X Launch”

Tesla Motors inc (TSLA) Model 3

Tesla Motors Inc (NASDAQ:TSLA) got a message of support from Baird analyst Ben Kallo this morning heading into the release of the firm’s Q2 sales numbers. Mr. Kallo says that Tesla should meet its own forecasts for the three months through June. That means sales of around 10.5k cars, and a smoother road ahead to meet full year targets.

Tesla Motors inc bear thesis

Mr. Kallo kept an Outperform rating on shares in Tesla Motors, and kept his price target of $335 on the firm’s shares. In his view not much has changed since his last report on the firm, but he wants to assert his belief that Tesla will meet its sales targets. Mr. Kallo’s last report, which recounted a visit to the Tesla factory, showed that Model X production is already up and running.

Assessing Tesla Motors sales

On April 3, just three days after the end of the first quarter Tesla Motors released sales numbers for the three months through March, and said it would do so in every quarter from then on. That means that the 3-month sales of the firm’s Model S for the three months through June should arrive in the coming days.

Trip Chowdhry of Global Equities Research wrote on Monday that he was looking for sales of 11,250 during the three month period and said that he expected the firm to have built more than 13,000 cars through June. He said that it’s “very likely” that Tesla will beat both sales and production targets when it reveals those numbers this week.

Most of Wall Street is bullish on Tesla Motors sales during the three months. Baird’s Mr. Kallo finds himself at the lower end of recent estimates. On Monday Credit Suisse analyst Dan Galves said that he was looking for Tesla Motors show sales of 11-11.5k cars in the three month period.

Mr. Galves said that this number would help Tesla Motors to overcome the short thesis that is doing the rounds on Wall Street. That might help the firm’s shares to rise, but there will always be something that those against Tesla Motors will be able to point to as a flaw in the firm’s business.

Beating the bear thesis

Mr. Kallo is more restrained in his estimates and admits not having a “clear read” on Tesla Motors deliveries during the quarter. He says that the high expectations being set by other Wall Street voices could lead to a drop in shares after the release of the real numbers.

“We would use any weakness in shares as a buying opportunity as we want to own shares into the Model X launch and believe upcoming catalysts will drive shares higher,” he wrote. Mr. Kallo is very happy with progress at Tesla Motors in recent months, and he thinks there’s little truth in the bear idea that the firm won’t be able to sustain demand through 2015.

John Lovallo, the most vocal Tesla bear, said in a May 9 report that “the market continues to underestimate the significant challenges that lie ahead for Tesla.” What those challenges are remains to be seen, but Lovallo said that the Tesla Motors on-target sales in the first quarter showed financial weakness.

Wall Street does not seem to be moved by Lovallo’s prophecy of doom, however. Shares in Tesla have risen by more than 40% in the second quarter, and are looking to finish the period on a positive after Mr. Kallo’s report. At time of writing shares in the firm were trading up by 0.95 percent in the pre-market.

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Paul Shea

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