Jefferies sees Tesla's stock climbing more than 18% in the next year due to prospects for longer-term profitability. The firm raised its price target on the electric automaker on Monday to $400 a share from $300 a share. Tesla shares rose 2.4% in trading to close at $345.09. Jefferies, which has a buy rating on the stock, now ranks as one of the highest Wall Street price targets on Tesla. "Without assuming it is smooth sailing from here, Q3 reported gross margin levels that are consistent with sustained profitability while [average selling prices] should stabilize ahead of [second half] 2020 improvements. Stabilization in 2019 sets a better foundation for a return to growth in 2020 revenue and earnings. We continue to see Tesla maintaining its edge in product, affordability and technology," Jefferies analyst Philippe Houchois said in a note to investors. Jefferies' call comes after Tesla filed its detailed third-quarter report, which the firm notes did reveal that Tesla had one-off support such as $50 million of "warranty provisioning" compared to previous quarters. "However, much of the negative commentary ignored a clear trend of cost performance," Houchois said. "Gross margin ex credit of 20.8% was above the 20% level from where we think Tesla starts building sustained car profitability." Houchois believes "the wait for Q4 results could still be stressful," as he says investors will be watching this quarter closely due to the seasonal nature of deliveries "and risks inherent in ramping up the new plant in China." – CNBC's Michael Bloom contributed to this report.