Investor's Corner

Tesla (TSLA) gets love from Goldman Sachs with ‘Buy’ rating and $864 price target

Tesla (NASDAQ:TSLA) shares spiked during premarket trading hours on Wednesday morning on the heels of Goldman Sachs’ new bullish stance on the electric car maker. The Wall Street firm gave Tesla a “Buy” rating and a price target of $864 per share.

Goldman Sachs’ positive outlook on Tesla stock is based on its analysts’ estimates that pointed to Tesla’s long-term secular growth in the electric car market. In a report to investors, a team of Goldman Sachs analysts led by Mark Delaney wrote, “We expect the company’s early-mover advantage and technology cadence … will allow Tesla to maintain good market share and gross margins.”

Tesla’s young but rich history, along with a track record of improving product quality and performance over time, also has Goldman Sachs analysts interested in the company. The firm maintains that Tesla’s compounded annual growth rate, or CAGR, is expected to be over 20% for the next five years.

“We believe that Tesla screens attractively on EV sales relative to revenue growth compared to auto and tech companies, especially in the context of the improvements the company has made in cash flow,” the analysts wrote.

Despite the COVID-19 pandemic briefly halting production in Shanghai at the company’s production plant in January and both Fremont and Giga New York being temporarily shut down in the United States, Tesla stock has enjoyed a steady climb lately. Over the previous four weeks, TSLA stock has climbed 96%, including a 9.05% gain yesterday.

While Giga Shanghai has reopened, the company’s US-located plants remain closed, with a tentative date to open on May 4.

Even though Tesla has been affected by the numerous hurdles the coronavirus has put in the company’s way, the electric carmaker has somehow continued to defy odds. In early April, Wall Street released its estimates for Tesla’s Q1 2020 delivery figures, as the numbers needed revisions due to shutdowns at the company’s vehicle production facilities. Numbers from numerous firms, including Credit Suisse, suggested Tesla would deliver 75,000-80,000 vehicles during the first three months of the year.

Tesla beat these numbers, delivering 88,400 cars from January to March and marking the strongest Q1 in its history. The company’s earnings call may take place in late April or early May.

During premarket trading, the company’s stock was up 7.04%. At the time of writing, TSLA is trading at $735.92, up 3.67% for the day.

Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.

Tesla (TSLA) gets love from Goldman Sachs with ‘Buy’ rating and $864 price target
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