Story updated at 9:55 a.m. to reflect market activity.
Shares of Tesla gained 2.9% to $277.42 in morning trading.
The analyst firm set a price target for $400 for the electric vehicle maker. Tesla can continue to defend its competitive advantage in a niche market according to Stifel Nicolaus analyst James Albertine.
"TSLA appears to have carved out a defensible niche in the global market for luxury electric vehicles, and based on our recent tour of the Fremont, CA, facility, a sizable head start with respect to production," Albertine wrote. "The key risk remains demand, in our view, but given (a) competitors' apparent unwillingness to fully invest (resources/managerial autonomy), and (b) TSLA's brand resilience in spite of high-profile accidents/fires/recalls, it seems demand deceleration may be a late decade call at the earliest."
Separately, TheStreet Ratings team rates TESLA MOTORS INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate TESLA MOTORS INC (TSLA) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and generally higher debt management risk."