Baird analyst Ben Kallo said Tesla (TSLA) stock could surge above $400 per share on the roaring success of the Model 3.

Kallo recently raised his price target for Tesla to $411, up from his previous estimate of $368 and implying an upside of about 16% from Tesla's Thursday midday price of $354. Kallo argued that the share price increase could come as the total addressable market for the Model 3 "will likely be underestimated." Barron's first reported the news. 

Baird ascertains strong demand for the Model 3 given increasing U.S. demand in total car sales, luxury sedan sales and comparable vehicle sales. Most importantly, Kallo wrote, Tesla CEO Elon Musk thinks Model 3 demand could be as high as 700,000 units per year.

Tesla Shares have jumped 65% this year.

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