Baird Still Buying Tesla After Shareholder Meeting, Calls Energy Opportunity Underappreciated

Tesla Inc TSLA bolstered Baird’s bullishness during a Tuesday shareholder meeting by affirming its pace to meet Model 3 production milestones this quarter and become cash-flow and GAAP net income positive in the back half of the year.

The Rating

Baird Equity Research analysts Ben Kallo and David Katter maintained an Outperform rating with a $411 price target.

The Thesis

To be sure, Baird doesn’t necessarily buy into Tesla’s promise of near-term profitability.

“While we do not model GAAP profitability for conservatism, we believe TSLA will be able to achieve sustainable operating cash flow and operating profit in the intermediate-term, which would be a significant catalyst, in our opinion,” Kallo and Katter wrote in a note.

The analysts were largely concerned with how Tesla’s presentation resonated with investors. Specifically, they read the reelection of board members, including Chairman Elon Musk, as a “vote of confidence” in management.

In the near term, they anticipate continued focus on Model 3 progress but noted investors should keep an eye on ostensibly peripheral projects.

“We continue to believe the energy storage opportunity may be underappreciated by some investors; TSLA expects sequential expansion in margins and significant growth in deployments over the next few quarters,” Kallo and Katter wrote.

Price Action

At time of publication, Tesla shares were trading up 7.2 percent at $312.19.

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