The Top Pick For 2017

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Shares of Tesla Motors Inc. closed 2016 lower by more than 10 percent, but analysts at Baird are now calling the electric auto maker its top 2017 pick.

Baird’s Ben Kallo commented in a report Friday that Tesla’s ramp of its Model 3 car and Energy products are likely to exceed expectations in the coming year and the opportunity to investors at its current stock price isn’t properly reflected.

Energy Products

Specifically, Kallo believes Tesla’s battery sales are accelerating and should see additional benefits from a production ramp which will coincide with the launch of the Model 3 sedan.

In addition, Tesla’s Powerwall 2 offers consumers “a competitive pricing advantage per kWh and should allow [Tesla] to gain market share within the home and small business segments.” By some estimates, the Powerwall 2 has an approximate 30 percent advantage in terms of cost per total kWh over its closest competitor.

In fact, the payback period for the purchase of the technology could be as low as just 6.5 years in a region like Southern California or 8.7 years in Australia which is still cheaper than the best grid-only electricity generation solution.

Model 3 Optimism

Kallo further suggested Tesla’s Model 3 sedan will outperform all of its competitors as it provides a fully electric car at a competitive price.

Meanwhile, the Model S sedan is a luxury vehicle that provides triple the range of its closest competitors and still holds the advantage of being the first fully electric and luxury car model to hit the market.

The Model X SUV’s roll-out is expected to increase Tesla’s brand value “significantly” and its long-term trajectory remains intact with initial positive responses from consumers.

Finally, the analyst highlighted that the price of lithium-ion batteries, one of the most important input costs for Tesla’s business, is expected to decline by 10 percent annually through 2020 followed by a 7 percent annual reduction next decade.

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