Tesla, Inc.’s (TSLA) shares reversed course from their recent downward trajectory and rose by 3% on Monday, Jan. 10, after key analysts upped their price targets for the stock. Goldman Sachs analyst Mark Delaney confirmed Tesla as a Top Pick for his firm, and Tesla bull Adam Jonas of Morgan Stanley said that the company was a winner in the electric vehicle (EV) race. Both analysts increased their price targets for Tesla shares.
The increase in share price came after a bruising four-day period for the stock during which its price fell from $1,200 to as low as $980. The decline occurred even after Tesla announced record delivery numbers.
Morgan Stanley's Adam Jonas said that the current landscape for electric vehicles was a race and that Tesla was winning it. "Think of the EV race as a marathon," he wrote. "Tesla is in the lead at mile number 21. Everybody else is at mile 2 or still tying their shoes."
According to Jonas, recent record deliveries of its cars were proof that Tesla's position will become stronger as the marathon progresses. He revised his price target for the automaker's shares to $1,300 from $1,200 and predicted delivery figures of 2 million for 2022. Tesla delivered 936,000 vehicles last year and plans to increase that figure by 50% this year.
Meanwhile, Goldman Sachs analyst Mark Delaney bumped Tesla's price target to $1,200 from $1,125. He placed Tesla stock in the Outperform category and called it the "Best Idea" in the electric vehicle sector. Like Jonas, Delaney also cited Tesla's leadership position in electric vehicles, adding that global electric vehicle adoption trends could act as a tailwind for the company's sales.
The caveat to this bullish assessment is that adoption rates may not pan out as expected, he wrote. A slowdown has the potential to curtail Tesla's lead and allow competitors, of which there are many, to catch up with the company's tech and infrastructure.
The enthusiasm of analysts for Tesla’s stock is centered around the company’s operational expertise. During the pandemic, when established car manufacturers struggled with chip shortages and supply chain bottlenecks, Tesla pivoted between suppliers by rewriting its software to keep its factories humming.
It also opened two new manufacturing facilities, in Austin and Berlin, to augment production. These facilities will bolster Tesla's bases in Shanghai and Fremont, California. Collectively, the developments mean increased operational margins and scale to manufacture its vehicles.
"The opening of the Berlin and Austin plants offers an opportunity to achieve even higher gross margins, which we expect Tesla to eventually reinvest into product, service/network expansion, and price," Morgan Stanley's Jonas wrote in an earlier note. Already, the company's cars are among best-sellers in several countries, including the United Kingdom and Norway.
Fundamentals aside, Tesla’s stock may have run ahead of itself in the markets based on average analyst estimates. Yahoo Finance calculates its average price target (based on analyst notes) at $894, while others have it at $916. There’s also the fact that the stock has an astounding price-to-earnings (P/E) ratio of 345.52, leading one to believe that investors in the company have inflated expectations about its future earnings.
Barrons. Tesla Is Miles Ahead Of Others In The EV Race, Says This Analyst. Accessed Jan. 11, 2021.
Barrons. "Tesla Is Goldman Sachs Top Pick." Accessed Jan. 11, 2022.
New York Times. "Why Tesla Soared as Other Car Companies Struggled." Accessed Jan. 11, 2022.
Financial Express. "Tesla's Stock May Rally." Accessed Jan. 11, 2022.
The Times. "Tesla Rises to Second In UK Car Sales." Accessed Jan. 11, 2022.
Reuters. "Tesla Grabs Overall Pole in Norway." Accessed Jan. 11, 2022.
Barrons. "Tesla Is Miles Ahead of Others in the EV Race, Says This Analyst." Accessed Jan. 11, 2021.
Yahoo Finance. "Tesla Analysis." Accessed Jan. 11, 2022.