Tesla Motors Inc (NASDAQ:TSLA) bulls got a new reason to be excited when the company accounted that it would build a $5 billion energy cell Gigafactory last month, pushing the stock price to new highs. While stock has cooled a bit since then, the idea still has lots of support from analysts. Baird Equity Research analysts Ben Kallo and Tyler Frank, who were already bullish on the stock, have increased their price target from $245 to $275 and reiterated their Outperform rating after increasing Tesla’s PE multiple to account for the potential in high end batteries.

Tesla Motors TSLA

Bull case sees Tesla at $350

“We left our meetings incrementally positive on TSLA’s ability to meet guidance of 35,000 Model S deliveries in 2014, and have expanded our earnings multiple due to opportunities in stationary storage” write Kallo and Frank, who bases his estimate on a 2016E non-GAAP EPS of $7.25 with a 38x multiple.

Even with that high multiple, they believe there is plenty of upside for the stock. If Tesla Motors Inc (NASDAQ:TSLA) manages to hit the bull case, which would mean selling 75,000 Model S and Model X vehicles as well as 350,000 of the economy class Gen III models, Kallo and Frank can see the stock price going as high $350. In the next year, the Baird analysts recommend looking for more news about the Gigafactory and the upcoming Model X as catalysts for price growth.

Valuing the Gigafactory

Considering how many details we are still missing on the Tesla Motors Inc (NASDAQ:TSLA) Gigafactory, any valuation is necessarily speculative. Lithium-ion batteries across many different applications, but they also tend to be expensive, with a median price of $1500/kWh and an average of $1756/kWh.

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Tesla Battery Storage

Kallo and Frank’s bullishness is based on the assumption that the Gigafactory can push down costs through scale and efficiencies without any technological breakthroughs, reaching the $400/kWh range (including power electronics, packaging and other costs). At that point, selling stationary storage units at $500/kWh would leave Tesla Motors Inc (NASDAQ:TSLA) with a reasonable margin while undercutting many other providers. A partnership with SolarCity creates the immediate opportunity to use those cheap energy cells to meet growing demand for renewable energy.

Even outside of the SolarCity partnership, intermittency is one of the main hurdles that renewable energy has to overcome before it really supplant traditional energy sources. Kallo and Frank see growing demand for the lithium-ion batteries and Tesla Motors Inc (NASDAQ:TSLA) getting a head start on mass production.