Tesla Inc CEO Elon Musk speaks next to a screen showing an image of Tesla Model 3 car during an opening ceremony for Tesla China-made Model Y program in Shanghai, China January 7, 2020. REUTERS/Aly Song

Argus Research has raised its target price on Buy-rated Tesla Inc. (TSLA) to $556 on better than expected 4Q deliveries.

Tesla recently announced it had achieved record production of 104,891 vehicles in 4Q19 and record deliveries of 112,000 vehicles, meeting a goal that the company had forecast at the beginning of last year. Total deliveries for 2019 of 367,500 were 50% higher than in 2018.

We are raising our 2020 EPS estimate to $5.96 from $4.40 to reflect improved economies of scale in 2020 production and delivery results and a better-than-expected ramp up of vehicles produced at the Shanghai factory in China. The 2020 consensus estimate is $5.58.

Our positive stance on the stock, which is up 40% over the past year versus 27% for the S&P 500, assumes ongoing revenue growth from the legacy Model S and Model X, as well as continued strong demand for the new Model 3. The recent (record) production and delivery performance for the fourth-quarter of 2019 highlight the popularity of the Model 3, which accounted for more than 80% of 4Q production.

Despite the recent jump in the stock price, we continue to see significant upside for TSLA shares based on accelerating revenue trends and strong demand for the Model 3.

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