Baird Equity Research analysts Ben Kallo and Tyler Frank reiterate their Outperform rating for Tesla Motors Inc (NASDAQ:TSLA) and bump their price target on the electric carmaker.

Tesla Motors TSLA

We reiterate our Outperform rating and are increasing our price target to $245 following Q4 results which beat estimates on both the top and bottom lines. Importantly, TSLA issued 2014 delivery guidance of 35k Model S’ which bested our expectation of 29k cars. Tesla Motors Inc (NASDAQ:TSLA) also met its margin target and expects to expand margin throughout 2014 while increasing production to 1,000 cars per week by year end. With catalyst ahead, we think the stock will continue to move higher.

Tesla Motors Inc (TSLA)’s Q4 beat across the board

Tesla Motors Inc (NASDAQ:TSLA) reported Q4 revenue of $761.3M vs. our/consensus estimate of $677.4M/$683.9M. TSLA had Non-GAAP Net Income of $45.9M and Non-GAAP EPS of $0.33 vs. our/consensus estimates of $29.1M/$31.1M and $0.21/$0.23, respectively.

2014 delivery guidance of 35k vehicles exceeded estimates – additional production capacity currently under construction. Tesla Motors Inc (NASDAQ:TSLA) believes it will reach a YE:14 production rate of 1,000 Model S vehicles per week, exceeding its previous forecast of 800. With production ramping faster than expected, we believe there could be upside to TSLA’s delivery target.

Automotive gross margin target of 28% by YE:14 should be achievable through supplier breaks and production efficiencies. We believe TSLA will be able to expand Model S gross margin from 25.2% in Q4:13 to ~28.0% in Q4:14 as it receives volume discounts from suppliers and increases production. Management believes gross margin could exceed 28% if the current option take rate is sustained throughout 2014.

Tesla’s Giga factory details to be provided soon

Giga factory details to be provided over the next two weeks, expect a capital raise to fund construction. We believe the gigafactory is an important step in driving down manufacturing costs for the Gen III vehicle and partners likely include Panasonic and upstream materials providers. Additionally, we expect TSLA will raise additional capital to fund construction of the factory and think this is a smart move at current stock levels with a well defined use of proceeds. We believe this catalyst makes it difficult to short the stock ahead of more details.

Tesla Motors price target increased

Our price target is based on 34x our 2016E non-GAAP EPS of $7.21 which includes sales of ~48,000 Model S and ~38,000 Model X vehicles (increased from 40,000 and 36,000, respectively) . We believe our multiple is valid when compared to other technology and consumer category creators.