Does Tesla's 'Blue Sky' Valuation Still Leave Room For Upside?

Is Tesla Inc TSLA on a path to $500 per share?

Baird Equity Research believes it's feasible if company management is able to achieve its stated targets.

“Based on consensus revenue compound annual growth estimates for 2016-2019E, we do not believe there are any companies of comparable market cap which offer a similar top-line growth profile. Additionally, with several upcoming catalysts, we believe it will be increasingly difficult to short the stock,” said Baird analyst Ben Kallo.

The company remains a top pick at Baird, and while Tesla does possess a ‘Blue Sky’ valuation -- meaning investors are paying for the significant goodwill that is currently priced into the stock -- there is still opportunity for significant upside.

Due to Tesla’s household name status, Baird believes it will lead to increased consumer demand for future Tesla products, including the upcoming Model 3 launch. Tesla’s ability to attract high-quality talent in the extremely competitive tech sector is also an encouraging sign for the company to continue future success.

Tesla's Competition Can't Keep Up 

The bear argument on Tesla appears to be losing steam from a lack of viable competition.

“Competition has been a bear argument since TSLA first began manufacturing cars, although we believe TSLA remains ahead of competitors in battery technology, autonomous driving, and electric vehicle production,” said Kallo.

“While tech companies focus on developing autonomous driving or battery technology, and traditional automobile companies are beginning to invest in electrification, we think TSLA has a unique expertise across all of three of these businesses, which should enable it to outperform competitors over the long term.”

Baird maintains an Outperform rating on Tesla, with a $368 price target.

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