Tesla to rally 72% on autopilot update: Baird

Published Wed, Sep 14 201612:00 PM EDT

New autopilot technology released by Tesla Motors along with several other upcoming catalysts could help shares of the electric-car manufacturer rise 72 percent in the next 12-months to $338, according to analysts at Baird Equity Research, who reiterated an outperform rating on the stock. Tesla's latest upgrade , which combines radar systems with existing video cameras to improve recognition of potential obstacles on the road, is expected to address safety concerns following a fatal crash and other incidents involving the autopilot feature. "Although other manufacturers are introducing autopilot systems based on a suite of technologies (cameras, lidar, radar, etc.), we believe TSLA's radar-based system should provide improved functionality and increased safety since TSLA has solved the main challenges with radar, including object identification," wrote senior equity analyst Ben Kallo in a note to clients. Tesla Motors, 1 year Source: FactSet According to Baird Equity Research, Tesla Motors is the "leader in autopilot technology," and remains focused on incorporating a range of safety features that could eventually lead to additional sales. "We think demand for the Model S will remain strong throughout 2016 in the U.S. and Europe," said Kallo. In the past 12 months, shares of the automaker are down nearly 23 percent compared with a gain of 9 percent for the S & P 500, weighed down by seven consecutive quarters of negative earnings. In the next 18 months, however, Kallo predicts that trend could change due to increased Model X production, additional details on its lower-price vehicles, Model III, and capacity expansion for its energy storage solutions, particularly with the development of a lithium-ion battery factory named Gigafactory. "The Gigafactory will be a significant catalyst, lowering TSLA's costs of production as well as diversifying revenue. Musk has noted TSLA Energy could sell $400-$500M of storage systems in 2016 and 'a few billion' in 2017 (we model $500M)," the analyst said. To be sure, Wall Street is not as bullish on Tesla, with the consensus 12-month price target for the carmaker standing at $242, implying a gain of just 24 percent.

A Tesla Model S in a Tesla showroom in Brooklyn, New York

Spencer Platt | Getty Images

Tesla's latest upgrade, which combines radar systems with existing video cameras to improve recognition of potential obstacles on the road, is expected to address safety concerns following a fatal crash and other incidents involving the autopilot feature.

"Although other manufacturers are introducing autopilot systems based on a suite of technologies (cameras, lidar, radar, etc.), we believe TSLA's radar-based system should provide improved functionality and increased safety since TSLA has solved the main challenges with radar, including object identification," wrote senior equity analyst Ben Kallo in a note to clients.