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Tesla Draws Buy Rating and $864 Target as Goldman Resumes Coverage

Goldman analysts say the company is 'well positioned to benefit from long-term secular growth in EVs.'
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Tesla  (TSLA)  shares rose in premarket trading Wednesday after Goldman Sachs resumed coverage of the country’s largest electric vehicle maker with a buy rating and a $864 share-price target.

The rating for Tesla came a day after Credit Suisse upgraded the stock to neutral from underperform.

“We believe that the company is well positioned to benefit from long-term secular growth in EVs, and we expect the company’s early-mover advantage and technology cadence … will allow Tesla to maintain good market share and gross margins,” the Goldman analysts, led by Mark Delaney, wrote in a report.

“We expect Tesla’s revenue CAGR [compounded annual growth rate] over the next 5 years to be well over 20%, and 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 improvementsthe company has made in cash flow.”

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To be sure, Tesla isn’t trouble free. Its plant in Fremont, California was closed last month because of the coronavirus pandemic. The company also has sought rent reductions from some of its landlords, as it looks to preserve cash amid its stalled operations, The Wall Street Journal reported.

Morningstar analyst David Whiston offered a mixed assessment of Tesla. On one hand, it “has a chance to be the dominant electric vehicle firm,” he wrote in a commentary last month. “But we do not see it having mass-market volume for about another decade.”

Tesla shares stood at $759.85 in premarket trading, up 7.04%. The stock has jumped 30% over the past month through Tuesday.