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Tesla’s $35,000 Model 3 sedan is widely considered a defining vehicle for the company. With its price well below that of the larger S, it’s often seen as a vehicle that could make, break—or at least severely hamper—the brand’s appeal to mainstream customers.

And so the rollout of the Model 3, which began reaching customers late last year, has been closely watched, particularly as production delays have been widely reported.

On Tuesday morning, however, Baird & Co. wondered whether a focus on execution issues might be obscuring the bigger picture—while also expressing confidence that Tesla (TSLA) would be able to meet its new production targets for the car. “We believe TSLA now has better visibility into its production bottlenecks,” they wrote.

• “Demand for the Model 3 could be underestimated,” Baird wrote, and “could accelerate with further positive reviews from early customers. Bears have argued that production delays, competition, and quality issues could limit demand for vehicles, but we continue to expect demand for all TSLA vehicles will remain robust and early reviews have not identified significant quality issues.”

Baird believes that Tesla could eventually sell more than 500,000 Model 3s annually. That would put it squarely among the nation’s top-selling vehicles.

• Baird also believes the company will be able to post substantial margins on the Model 3 over time.

“Bears may focus on weak gross margins in Q4 and we believe there is substantial skepticism on TSLA’s ability to “make margin” on its vehicles,” they wrote. “Importantly, while the slower-than-expected Model 3 ramp may have impacted margins in recent quarters, we expect sequential expansion throughout 2018 and think the company will be able to achieve a 25% gross margin.”

• Baird reiterated an Outperform rating on the shares. It has a $411 price target on the shares, roughly 30% above current levels.

Email David Marino-Nachison at david.marino-nachison@barrons.com. Follow him at @marinonachison.