If you are as brilliant as Elon Musk, you don’t have to worry about where your company’s stock is going. Sure, Tesla Motors Inc (NASDAQ:TSLA) stock plunged quite dramatically at the beginning of 2016. But the stock is making a strong comeback. In fact, if you take a look at the TSLA stock chart below, you’ll see a very pronounced V-shaped recovery.
Chart courtesy of www.StockCharts.com
As TSLA stock moves onto its growth path, analysts are saying that this might just be the start.
TSLA Stock: The Start of a New Rally?
On Monday, March 14, Robert W. Baird & Co. upgraded TSLA stock from “Neutral” to “Outperform” with a price target of $300.00. That’s 35% higher compared to where the stock is trading today. (Source: “Baird Brushes Off Model X Concerns in Tesla Upgrade, Sees High Short Interest as Catalyst for Upside,” Benzinga, March 14, 2016.)
One of the main concerns that led to Tesla stock’s downturn was “Model X” deliveries. While Baird was also concerned about the issue, company analyst Ben Kallo said that recent data suggested that production is actually accelerating.
The analyst recently visited Tesla’s factory and saw dozens of Model Xs in production. He noted that the concerns surrounding the Model X are similar to those expressed when the “Model S” was first introduced. But the Model S turned out to be a huge success and now the company has more experience addressing those concerns.
“We believe that TSLA’s manufacturing skills, ability to lower input costs and constant efficiency initiatives will allow the company to reach its 25%+ Model X gross margin target over time,” said Kallo. (Source: Ibid.)
Kallo also mentioned Tesla’s advantage when it comes to batteries. He said that the company is ahead of expectations on reducing battery costs and still has a strong upper hand in the electric vehicle market.
Baird’s conclusion: “We would be buyers at current levels.” (Source: Ibid.)
Note that the Baird analyst is not the only one considering TSLA stock a “Buy” at today’s price. Oppenheimer’s Colin Rusch also gave an “Outperform” rating to TSLA stock but with a higher price target of $340.00. That represents 53.2% upside potential! (Source: “Tesla Motors: ‘We Remain Bullish’, Oppenheimer Says,” Barrons, March 16, 2016.)
Oppenheimer recently met with Tesla’s investor relations and was told that production of the Model X is currently at “several hundred per week.” Oppenheimer believes that the company has a good chance of reaching its goal of 1,000 Model Xs per week by the end of the second quarter.
The investment firm is also quite optimistic about Tesla’s cash flow. The company’s goal is to generate core operating cash flows of $700 million–$800 million in 2016, pulling down $1.0 billion from its ABL to fund CAPEX spending during the year. Oppenheimer said that Tesla is “clearly progressing toward” being cash flow positive this year.
The Bottom Line on TSLA Stock
In recent months, concerns about Tesla’s production issues have resulted in a lot of short sellers jumping onboard. In the past seven months, Tesla’s short interest surged 43%, from 23,784,845 to 34,052,747. (Source: “Tesla Motors Inc Short Interest,” NASDAQ web site, last accessed March 16, 2016.) Short sellers would eventually have to cover their positions.
Now, Tesla is scheduled to unveil its mass market “Model 3” on March 31. If the new car manages to whet investors’ appetites, it could spark a short squeeze in TSLA stock.