We are maintaining our BUY rating on Tesla Inc. (TSLA) and raising our target price to $808 from $556. Our positive view assumes continued revenue growth from the legacy Model S and Model X, as well as strong demand for the new Model 3, which accounted for more than 80% of 4Q19 production.

In 2020, Tesla expects more than 500,000 vehicle deliveries, driven primarily by the ramp-up of Model 3 production in Shanghai. The company also expects positive quarterly cash flow this year, which will help it to self-fund operations, and positive GAAP net income.

Despite past production delays, parts shortages, labor cost overruns, and other difficulties, we expect Tesla to benefit from its dominant position in the electric vehicle industry and to improve performance in 2020 and beyond.

The shares, up more than 60% so far in 2020, appear to be benefiting also from short covering (TSLA is one of the most shorted stocks) and the potential to be added to the S&P 500 index if profitability continues as projected.

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