Shares of Tesla (TSLA 0.13%) surged on Monday, rising more than 7%. The growth-stock's gain may have been driven, in part, by an upbeat day for the S&P 500 and the tech-heavy Nasdaq Composite.
But shares likely also benefited from a bullish analyst note. Baird analyst Ben Kallo put Tesla on his "best ideas" list this week, citing a range of catalysts for the stock that could help shares hit his 12-month price target of $300.
Could Tesla shares really rise about 30% higher over the next 12 months?
To assess whether this is plausible, let's examine why Kallo is so bullish on the electric-car maker's shares. Though the analyst listed a handful of catalysts for Tesla stock, here are the three that may be the most important.
1. Cybertruck
Perhaps the most important catalyst for Tesla stock that Kallo pointed to is the company's long-awaited Cybertruck. It's difficult to overstate the impact the all-electric truck could have on Tesla's business. Tesla CEO Elon Musk has said, on several occasions, that the company will start deliveries of the new vehicle this year.
The three best-selling vehicles in the U.S. last year were pickup trucks. Ford's F-Series truck deliveries alone came in at more than 650,000 units. Tesla delivered less than 500,000 vehicles globally in its most recent quarter, so the Cybertruck will substantially expand its addressable market.
Unsurprisingly, demand for the all-electric truck is huge.
"Demand is so far off the hook you can't even see the hook," Musk said in the company's second-quarter earnings call.
2. Driver-assistance software
Another key catalyst Kallo cites is an expectation for continued adoption of Tesla's Full Self-Driving (FSD) driver-assistance software. Tesla expects the software to enable autonomous driving eventually.
For now, however, it's simply glorified driver assistance technology -- albeit it's top-notch tech that's able to read and respond to stop lights, stop signs, and even complex situations like traffic circles. Available for purchase for $15,000 upfront or for a monthly subscription, the wildly pricey software is growing in popularity with Tesla drivers. The better the software gets, the more adoption it will likely see.
Though Tesla CEO Elon Musk is known for being overly confident in his forecasts, he indicated in the company's second-quarter earnings call that these are early days for the beta software. FSD beta has already been utilized across its fleet for over 300 million miles, he explained.
But this number "is going to seem small very quickly," he said. "It will soon be billions of miles, tens of billions of miles." Indeed, he says that Tesla now sees "a clear path to full self-driving being 10x safer than the average human driver."
3. Tesla energy
Finally, there's Tesla's energy business, which consists of energy storage products and solar solutions. This business may be small today at about 7% of second-quarter revenue, but it's growing at an incredible rate.
Tesla's energy generation and storage revenue rose 74% year over year in Q2 to more than $1.5 billion. Further, energy storage deployments, measured by gigawatt hours, increased 222% year over year during the quarter.
As this business grows as a percentage of total revenue, investors will likely start paying more attention, and the market may ultimately assign it a greater value.
Though there are certainly some good reasons for Tesla stock to potentially rise to $300 within 12 months, there are a lot of risks, too. Valuation is one of them. Trading at 75x earnings, the stock is already priced for strong growth in both revenue and earnings for years to come.
Investors, therefore, might want to wait to see if they get an opportunity to buy the stock at a lower price -- particularly following the stock's big jump on Monday. On the other hand, catalysts for the stock are piling up. Investors, therefore, may want to take some time to look more closely at the stock to see whether Kallo's buy recommendation makes sense for them.
