Tesla's market-crushing performance this year will continue, according to one Wall Street firm.



Baird told its clients the long term opportunity for the company's Model 3 is larger than investors think.



"We expect strong demand for the Model 3 and believe the total addressable market will likely be underestimated, but think it will be an ongoing process to ascertain global demand," analyst Ben Kallo wrote in a note Monday. "Tesla remains one of our top picks for 2017 and we are raising our price target as we continue to believe a successful Model 3 launch will be an inflection point for the stock."



The electric car maker's shares are outperforming the market this year. Its shares are up 67.5 percent year to date compared with the 9 percent return.



The analyst reiterated his outperform rating and raised his price target for Tesla shares to $411 from $368, representing 15 percent upside from Friday's close.



Kallo estimates the lower-to-middle-priced luxury sedan market in the United States is 1 million vehicles a year.



"We think the large US market will support sales of the Model 3, and significant additional opportunities exist internationally," he wrote.



He cited Tesla figures that net orders for the car rose to 1,800 per day since the recent delivery of the first Model 3s to 30 company employees. Tesla CEO Elon Musk also said Model 3 demand could reach 700,000 cars per year, Kallo noted.



In addition, Musk is "confident" the company can reach a production level of 10,000 Model 3 vehicles per week at some point next year.



"We continue to believe Tesla Energy may be underappreciated by investors, and think the segment could be as important as the auto business over the long term," he wrote.



Tesla shares rose 2 percent in Monday's premarket trading after the call.



— CNBC's Michael Bloom contributed to this story.