Baird analyst Ben Kallo continues to like the Tesla share setup for the balance of the year, despite the recent move higher.

The company's further execution, beginning with the Q2 earnings report, will "help restore credibility and create a challenging short environment," Kallo tells investors in a research note titled "Q2 the Next Step in Restoring Bull Thesis."

The analyst keeps an Outperform rating on Tesla with a $355 price target. The stock closed Tuesday down $1.12 to $252.38. While bear arguments have shifted to margins following the Q2 delivery release, expectations for Tesla "have become overly negative," says Kallo.

As such, he believes the company's margin results could exceed estimates.

Further, Tesla's cash balance at the end of the quarter could be $4.5B-plus, which would be viewed favorably, adds the analyst.