Shares of Tesla jumped more than 4% in Thursday’s pre-market session after Goldman Sachs upgraded the electric vehicle maker’s stock to Buy from Hold and ramped up the price target to a Street high of $780.
“We believe that the shift toward battery electric vehicle (EV) adoption is accelerating and will occur faster than our prior view,” Goldman Sachs analyst Mark Delaney commented in a note to investors, lifting TSLA’s price target from $455. “We believe that battery prices are falling faster than we previously expected which improves the economics of EV ownership, and there has recently been an increase in regulatory proposals from some jurisdictions to limit or ban the sale of new internal combustion engine (ICE) vehicles entirely in 10-20 years.”
In this scenario, Delaney is confident that Tesla’s integrated model, which includes custom hardware and software and allows for an overlap between key products like the Model 3 and Y, as well as a full ecosystem of products for consumers such as solar and access to fast charging, will help it to sustain a leadership position in the EV market.
The analyst now expect EVs as a percent of new light vehicle sales globally to rise from 2% in 2020 to 18% in 2030 and 29% in 2035, with 50% adoption in both the US and in Western Europe. What’s more, he argues that the momentum behind EVs from both an economic and regulatory perspective is leading to a higher probability of his upside-case EV adoption scenario that calls for 26% global EV adoption in 2030 and 40% in 2035, with 66% in the US and 60% in Western Europe.
“Going forward we expect the company to drive strong growth in Model Y sales as it ramps three new factories (Shanghai, Berlin and Austin), and we are also now more positive about the long-term opportunity in both Automotive and Energy,” Delaney added.
The analyst believes that despite TSLA’s 579% year-to-date rally, there is still room for the stock to outperform if his “revised expectation for material upside to Street estimates and ongoing regulatory momentum for EVs and clean energy is correct.” Investors could be yielding another 37% upside should Delaney’s new price target be met over the next 12 months. (See TSLA stock analysis on TipRanks)
Meanwhile, this year’s stellar rally has left the rest of Wall Street analysts sidelined on the stock. The Hold analyst consensus shows 8 Holds, 7 Sells and 10 Buys. That’s with an average price target of $ 403.24, implying 29% downside potential lies ahead over the coming 12 months.
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