Shares of Tesla (TSLA) are on the rise after KeyBanc analyst Brad Erickson told investors that his checks with the company's sales centers showed Model 3 deliveries tracking ahead of his prior expectations for the quarter. As a result, the analyst raised his Model 3 deliveries estimate for the second quarter by 50% to 30,000.

MODEL 3 VOLUMES SHOWING MEANINGFUL RAMP: In a research note to investors, KeyBanc's Erickson said his checks with 20 Tesla sales centers across the U.S. indicate Model 3 volumes are showing a "meaningful ramp," with deliveries tracking about 50% higher than his prior estimates for the quarter. With three weeks to go in the quarter, the analyst estimates the company is tracking to something between 30K-35K Model 3 deliveries in the quarter versus his prior view of 20K-25K. Following the positive checks, Erickson raised his Model 3 deliveries estimate for the second quarter to 30,000 from 20,000 and his 2018 estimate to 118,182 from 98,182. The analyst noted that he continues to expect gross margins on the Model 3 to turn positive in the third quarter and thinks evidence to support the bear case that Model 3 demand is softening or that production is not ramping is not likely to emerge in the near-term. Additionally, Erickson pointed out that concerns surrounding perceived safety quality seem to remain anecdotal. Based on his checks, he believes the perceived quality of Model 3s coming off the lines continues to improve relative to prior checks, and views this as one of the critical factors in Tesla maintaining its "almost legendary status" in the eyes of customers. Nonetheless, the analyst reiterates a Sector Weight rating on Tesla shares, citing his "core belief" there is a significant premium built into the stock on perceptions of the company's innovative superiority around the "five critical aspects" of the story; namely manufacturing, batteries, software, artificial intelligence, and competition.

PRICE ACTION: In early afternoon trading, shares of Tesla have gained $19.20, or nearly 6%, to $351.30.