Electric car manufacturer Tesla Inc (Nasdaq: TSLA) hogged the limelight yesterday following the rating upgrade by Mark Delaney, an analyst at Goldman Sachs, citing an expedited adoption of electric vehicles. Following the news of the rating upgrade, the stock of Tesla gained 4.32% or $24.56 to close at $593.38. So far, the shares have gained over 600% in 2020.
The US-based multinational investment organization stated that the transition towards the adoption of battery electric vehicles is speeding up mainly due to a drop in battery costs and a sharp increase in regulatory suggestions to prohibit the sale of vehicles running on a non-renewable source of energy.
In a note to clients, Delaney wrote, “The shift toward battery electric vehicle adoption is accelerating and will occur faster than our prior view.”
The analyst also pointed to initiatives taken by some governments to end the sales of gas-guzzling vehicles in a phased manner and decreasing the price gap between electric vehicles and gasoline-based trucks and cars.
Delaney said, “Battery prices are falling faster than we previously expected, which improves the economics of EV ownership.”
Furthermore, Goldman Sachs believes that the Palo Alto, California-based Tesla’s integrated model will assist in maintaining its dominating position in the growing electric vehicle industry.
Based on the facts presented above, Goldman Sachs upgraded the stock of Tesla to “buy” from “neutral” and upwardly revised its price target to $780 per share, from an earlier level of $455. The price target reflects a premium of about 30% from the prior close. It is the highest price target given by a Wall Street firm.
Interestingly, following five successive quarters of profits, Tesla was chosen to be included in the S&P 500 Index. The Index Committee has decided to include the stock in the S&P 500 Index on December 21st. Investors have turned bullish after the company revealed its intention to sell half a million cars this year while increasing production with new facilities in the US and Germany.
Tesla’s little-known or discussed businesses such as battery and solar roof sales to homeowners and commercial firms are considered encouraging and perhaps worthier than figured earlier.
The report said, “The energy business should also benefit from the regulatory shift toward carbon reduction and clean energy, and solar market valuations have similarly accelerated.”
The rating upgrade is expected to keep the stock range-bound with a slight bullish bias.
The historical price chart indicates that the stock has started rising after breaking the ascending triangle and consolidating at 400 levels. The Chaikin money flow indicator also has a positive reading. Furthermore, the stock is also trading above the 50-day moving average.
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