Baird Analyst: Tesla Is Not A Good Short With Model 3 On Its Way

Tesla Inc TSLA is one of the most polarizing stocks in the market. Baird analyst Ben Kallo is among the most optimistic Tesla bulls. On Monday, Kallo reiterated his Overweight rating for Tesla and raised his price target for the stock from $368 to $411. He also issues a word of warning for the all the Tesla short sellers out there, and there are plenty of them.

According to Kallo, shorting Tesla is a dangerous game at this point.

“In our opinion, TSLA is not a good short headed into the Model 3 ramp as we continue to believe upcoming catalysts will drive shares higher, and TSLA remains a top pick for 2017,” Kallo wrote (see his track record here).

Related Link: Tesla Earnings Beat Costs Shorts $300 Million

Despite the fact that Tesla stock is up another 71.0 percent in 2017, financial analytics firm S3 Partners reported earlier this month that Tesla is the single most heavily-shorted American company in the market, with more than $9 billion in short interest.

Kallo says those short sellers will be in for some pain in the months ahead. Not only does he see the Model 3 living up to the hype, he suggested global demand for the vehicle may actually end up larger than anticipated. Tesla CEO Elon Musk has said the Model 3 alone could eventually account for 700,000 vehicles of demand per year.

Kallo also addressed Tesla’s cash problems, the primary concern for many short sellers. He said Tesla’s ability to receive payment for Model 3s before payments are due to suppliers should help ease the cash burn pressure and improve Tesla’s balance sheet.

Baird is estimating Tesla will deliver 25,500 Model 3 vehicles in 2017, 190,000 vehicles in 2018, 295,000 vehicles in 2019 and 462,500 in 2020.