Stocks are slightly lower Thursday after a strong run over the past few days. It is not a down day for Tesla (TSLA) , though. The stock is up 1.88% to $373 in late afternoon trading.
The move comes after Baird analyst Ben Kallo bumped his price target on the electric car maker to $465 from $411. The analyst reasoned that positive catalysts are starting to take over the Tesla story and that momentum can continue.
"The narrative on TSLA, particularly in the middle of 2018, was as negative as we have experienced in our coverage, but we believe sentiment will continue to improve," Kallo wrote. However, the stock has more upside potential as the company becomes more self-reliant.
Entering the third quarter of 2018, Tesla was just starting to ramp up production of the Model 3. Its earnings results in August were not amazing, but the automaker proved it was on track with production and while still burning cash in the previous quarter (Q2), the results were better than expected.
The post-earnings rally was short-lived once CEO Elon Musk tweeted his intentions to take Tesla private at $420 per share. That led to an SEC investigation that resulted in a $20 million fine (to Musk and Tesla) as well as Musk losing his role as chairman for three years.
When Tesla reported its third-quarter results in October, the automaker made a number of improvements, reporting positive free cash flow of $881 million and $516 million in profit. Both numbers came in significantly higher than expected.
As Kallo states, though, the narrative on Tesla is continually improving. The SEC issue has been settled, production continues to improve and the automaker is looking to bring 3,000 Model 3s to Europe per week starting in February.
"We do not believe the strong Q3 results were a 'flash in the pan' and think TSLA could maintain profitability," he adds.
At the beginning of this month, TheStreet took a closer look at Tesla's chart setup, noting that the stock was consolidating near a very critical level of $360. This mark has been major resistance and is also near where Tesla has $920 million worth of convertible debt coming due in February. Below this mark and the company has to pay back the entirety of the loan. Above it and Tesla can use stock to pay back the loan.
The automaker has already stated that it plans to pay 50/50 with cash and stock -- provided the share price closes over the $359.86 conversion price when it comes due. Still, this $360 mark has been a vital level over the last year. The longer Tesla is able to consolidate over this level, the greater the odds it can rally to its prior highs near $390.
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