With Tesla (NASDAQ:TSLA) stock rising nearly 60% in the past six months, its valuation is pricing in significant growth in the coming years. But investors won't have to wait years for Tesla's ability to execute on ambitious growth targets to be tested. In 2017, Tesla has three milestones on the horizon it will need to achieve to keep investors betting optimistically on the company's longer-term growth potential.
Look for Tesla to live up to these three important landmark targets for 2017.
1. Model 3 production
It's difficult to overstate just how important the Model 3 is to Tesla's stock price. With a starting price of $35,000, or about half the starting price of its pricier Model S sedan, the upcoming vehicle represents the culmination of Tesla's efforts to date. Ever since Tesla CEO Elon Musk laid out his "secret master plan" in 2006, Tesla's mission was crystal clear: Tesla's pricier vehicles were only a medium for the company to build a business that could eventually support production of a higher volume, more affordable vehicle -- the Model 3.
But it's 2017 now, and it's time for Tesla to deliver on its promise. As of Tesla's most recent shareholder letter, the company said it plans to begin Model 3 production in July.
Can Tesla pull it off?
2. Volume production of Model 3
Of course, Tesla is going to need to do more than begin production of Model 3 in 2017. It needs to ramp up production to a significant volume. With a market capitalization of $51 billion yet having only delivered 86,500 vehicles in the trailing 12 months, investors are betting that Tesla will not only begin Model 3 production, but eventually scale it to annual production in the hundreds of thousands.
Tesla has said it expects to achieve "volume production" in September.
What could the production ramp-up of Model 3 look like? Tesla gave a preview of what management expects in the company's fourth-quarter shareholder letter:
"Our Model 3 program is on track to start limited vehicle production in July and to steadily ramp production to exceed 5,000 vehicles per week at some point in the fourth quarter and 10,000 vehicles per week at some point in 2018."
For the entire year of 2018, Tesla expects the combined production of Model S, X, and 3 to add up to about 500,000 units.
3. Production ramp-up of solar glass tiles
Another key area investors should keep their eyes on is Tesla's ability to put its late 2016-acquisition of SolarCity to work. One of the first targets on the horizon for Tesla's solar business is bringing its new glass solar tiles to market and ramping up their production.
In Tesla's fourth-quarter earnings call, Tesla's chief technology officer, J.B. Straubel, said Tesla will "ramp and start scaling" production of its solar tiles by the end of the year.
For Tesla to live up to high investor expectations, it's going to have to deliver on these three near-term milestones first. Otherwise, investors will have little confidence in Tesla's longer-term targets, namely its goal to produce 500,000 vehicles annually by next year and 1 million annually in 2020.