Shares of Tesla (TSLA) are on the rise after the electric carmaker reported an uptick in Model 3 output, but still short of CEO Elon Musk's goal of 2,500 vehicles a week. Tesla also said it will not require an equity or debt raise this year. Following the announcement, Baird analyst Ben Kallo told investors he sees the update as "good enough," while his peer at KeyBanc noted that the automaker's delivery report was "better than feared" and showed that significant improvement has been made in Model 3 production.

PRODUCTION, DELIVERIES: In a regulatory filing, Tesla said that first quarter production totaled 34,494 vehicles, a 40% increase from the fourth quarter and "by far the most productive quarter in Tesla history. 24,728 were Model S and Model X, and 9,766 were Model 3. The Model 3 output increased exponentially, representing a fourfold increase over last quarter. [...] We were able to double the weekly Model 3 production rate during the quarter by rapidly addressing production and supply chain bottlenecks, including several short factory shutdowns to upgrade equipment. In the past seven days, Tesla produced 2,020 Model 3 vehicles. In the next seven days, we expect to produce 2,000 Model S and X vehicles and 2,000 Model 3 vehicles. [...] Given the progress made thus far and upcoming actions for further capacity improvement, we expect that the Model 3 production rate will climb rapidly through Q2. Tesla continues to target a production rate of approximately 5,000 units per week in about three months, laying the groundwork for Q3 to have the long-sought ideal combination of high volume, good gross margin, and strong positive operating cash flow. As a result, Tesla does not require an equity or debt raise this year, apart from standard credit lines. Q1 deliveries totaled 29,980 vehicles, of which 11,730 were Model S, 10,070 were Model X, and 8,180 were Model 3." The company added that its Q1 performance keeps it on track for its previously communicated full-year 2018 Model S and X delivery guidance.

'GOOD ENOUGH': Commenting on Tesla's production and delivery update, Baird's Kallo reiterated an Outperform rating and $411 price target on the carmaker's shares as he believes the announcement was "good enough." The analyst highlighted that Tesla has indicated no capital raise will be needed in 2018, which has been a recent bear argument, as cash flow should increase along with Model 3 production. Importantly, Kallo believes that the growing Model 3 production rate should allow the company to have significantly higher volumes in the third quarter onward, which should drive solid gross margins and operating cash flow. Meanwhile, KeyBanc analyst Brad Erickson told investors in a research note of his own that he believes Tesla shares should see a relief rally after the company's first-quarter delivery report came in "better than feared" and showed that significant improvement has been made in Model 3 production. Tesla bears will "almost certainly question" the company's pledge that it needs no more capital raises this year, but Erickson thinks if Model 3 production approaches 4,000-5,000 per week, Model 3 gross margins should turn profitable. While Model S and X deliveries were below the Street's sell-side estimates, they were likely "good enough" for the buy-side, Erickson added. Nonetheless, he reiterated a Sector Weight rating on the stock as he ultimately struggles with investor perceptions of the company's innovative superiority in the areas of manufacturing, batteries, software, AI, and competition.

PRICE ACTION: In late morning trading, shares of Tesla have gained over 3% to $261.01.