With just a few weeks to go until Tesla (TSLA) joins the S&P 500 Index, investment management firm Goldman Sachs has changed its outlook on the California automaker.
Analyst Mark Delaney upgraded Tesla from a neutral rating to buy this afternoon, and increased his price target from $455 to $780. The reason for the positive outlook was detailed in a note to investors titled, “Tesla to Buy on better long-term sales outlook and margin expansion.”
According to the analyst, his firm has previously underestimated the rate of electric vehicle (EV) adoption. As a result he expects worldwide EV adoption to make up 18% of sales globally by 2030, with a higher 50% adoption rate in North America by 2035.
To go along with the underestimation, Delaney also attributes the buy rating to the lowering battery prices, which “improves the economics of EV ownership.”
With Tesla’s integrated ecosystem of products, Delaney says Tesla will be able to “sustain a leadership position in the EV market.” If it does, he estimates Tesla could hold as much as 30% of the EV market share and deliver between 15M and 20M units by 2040. If the rate of EV adoption occurs quicker than he expects, Delaney says Tesla will reach these volumes even quicker.
Shares of Tesla (TSLA) reacted quickly in after-hours trading following the announcement, up 3% to $585.88 after closing at $568.82.
h/t: Sawyer Merrit
Legal Disclaimer – Mike holds shares of Tesla, Inc. (TSLA) and has no plans to change any positions within 72 hours.