Tesla

Tesla's most bullish analyst, Pierre Ferragu of New Street Research, toured the company's Fremont, California, factory last week.

He says the factory is a crowded mess, with production 30% below targets, but isn't dissuaded by the missteps.

"Failure is where one learns the most," he told clients of Elon Musk's very public stumbles to reach production targets.

Pierre Ferragu has been Tesla's most optimistic Wall Street analyst for the better part of a year, and he isn't giving up hope anytime soon.

After a recent tour of the company's factory in Fremont, California, the New Street Research analyst has reaffirmed his $530 price target for the stock — well above Wall Street's consensus of $327 — despite a scrapped conveyer-belt system and unused production capacity.

"We were impressed to see how the lack of space and the overly ambitious initial design of the Model 3 production line created a lot of unnecessary complexity in the factory," Ferragu said Tuesday in a note to clients. "The place is a crowded mess!"

The factory was initially designed to have two layers, with one moving parts for assembly and the other moving assembled vehicles. But when Ferragu visited last week, CEO Elon Musk's grand plans for the place seemed to have faded.

"None of this worked much," Ferragu said. "The conveyor belt system has been scrapped and supplies are brought manually to each assembly step, creating a fairly impressive mess across the floor. Production lines are 30% less productive than initially anticipated."

Read more: Leaked documents reveal Tesla had an aggressive production ramp for its Model Y — but the company says its plans have changed

And while this might discourage some investors, Ferragu — who is known for saying Tesla aims too high (and thus misses internal targets) on purpose — says it's only further proof of the company's grand ambitions and potential.

"All this feeds a lot of bear argument on the company — we see it the exact opposite way," he said.

"Failure is where one learns the most. The third assembly line, pulled together under a tent in three weeks, is impressively efficient and well-organized. One more time, by shooting way too high, Tesla failed on its original plan, but achieved a world-class result."

Shares of Tesla are set to open near $365 on Tuesday and are up 11% since the beginning of the year after the company turned a surprise profit on its third-quarter earnings report in October.

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