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Goldman Sachs: Tesla's a buy

May 18, 2016, 19:40 IST

Google Finance

Tesla shares jumped Wednesday after Goldman Sachs auto analyst Patrick Archambault upgraded the electric-car maker's stock to 'buy' with a $250 target price.

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The stock was up more than 3% to just over $211 in early trading.

This is an important vote of confidence for Tesla. Archambault has been moderately bullish on Tesla, but always with judicious qualifications.

After an early year swoon in the shares, he and his team appear confident that a bump from currently trading levels is possible - if Tesla can execute and, raise around $1 billion in new capital - and that mid-2016 is a good moment to dive in.

However, Tesla has miles to go before it can make good on its own expectations.

The Model X SUV rollout hasn't gone smoothly, the company recently hired a seasoned Audi manufacturing executive to get Tesla's actually car building on track, and 400,000 pre-orders for the Model 3 mass-market vehicle has creating a very large hill for Tesla to climb.

The automaker, which has been able to deliver barely 50,000 vehicles in its best year, 2015, recently said it was targeting 500,000 deliveries by 2018 (two years sooner than earlier projected).

"While we believe the volume targets are ambitious, Street and investor expectations seem more grounded and following a 23% decline in the share price post the Model 3 unveil, we do not believe Tesla shares are fully capturing the company's disruptive potential," Archambault wrote.

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