Baird Is A Buyer Of Tesla Ahead Of Its Earnings

Baird’s Ben Kallo believes that the Q4 results could be a de-risking event for Tesla Inc TSLA in the near term and recommends buying the shares.

The analyst maintains an Outperform rating on the company, with a price target of $338.

Expectations From The Call

“We expect updates on the Model 3 and Gigafactory production ramps on the call, which we believe will drive shares higher,” Kallo mentioned.

Kallo now expects 25,000 Model 3 deliveries in 2017, and expressed confidence that Tesla would be able to ramp production, although the company was unlikely to give a specific Model 3 guidance.

In addition, the analyst expects less focus on the SolarCity Corp SCTY acquisition, “although there may be short-term noise as expectations are calibrated.”

Estimates

For fourth-quarter 2016, the estimates are above the consensus expectations at $2,241.3 million in non-GAAP revenue and EPS of $(0.07), while the gross margin estimate of 23.8 percent is below consensus.

For 2017, the non-GAAP revenue estimate is $10,719.3 million, with gross margin of 24.4 percent and EPS of $(0.66).

“Given the broad range of expectations for SCTY project deployments and the Model 3, there are a wide range of estimates for Q4 and 2017, which could cause short-term noise as expectations are calibrated,” Kallo explained.

The analyst believes that any updates regarding the Model 3 production ramp, Tesla Energy and potential new product details could drive the stock up.

At last check, shares of Tesla were up 2.19 percent at $267.82.