Imported cars, including Tesla electric vehicles, are parked in Taipei in November.
Sam Yeh /AFP via Getty Images
On Sunday, Goldman Sachs analyst Mark Delaney increased his price target for Tesla stock to $1,200 from $1,125, while maintaining a Buy rating. Delaney also named Tesla a top pick for 2022.
Delaney believes Tesla is the leader in electric vehicles and that EV trends are poised to accelerate in 2022.
And the trends in the industry appear favorable. EVs’ shares of new-car sales in China hit 20% late in 2021, while the figure in Europe is running above 10%. EV penetration in the U.S. is only at about 3% of new-car sales, but there are more EV models reaching the U.S. market this year, including pickup trucks such as the Ford Motor (F) F-150 Lightning, the Rivian Automotive (RIVN) R1T and, of course, the Tesla Cybertruck.
Still, price-target increases don’t always have as much impact as changes to analysts’ ratings on stocks, and the big-picture headwinds for growth stocks in general are formidable at the moment.
Tesla stock was down 3.6% in early trading as high-growth stocks continue to be pummeled by fear of rising interest rates. Shortly after the open, the Nasdaq Composite was down 1.7%, while the S&P 500 and Dow Jones Industrial Average fell 1.1% and 0.6%, respectively.
Higher rates hurt highly valued growth stocks more than others because those companies are expected to generate most of their earnings and cash flow far in the future. The higher rates go, the less that cash is worth when it is discounted back into current terms, and the less investors may be willing to pay for those stocks.
A second issue, which Delaney pointed out, is that EV sales won’t grow as fast has he expects. That is a fundamental risk that is always present for the EV sector.
Still, Delaney remains a Tesla bull. Overall, 45% of analysts rate Tesla shares Buy, while the average Buy-rating ratio for stocks in the S&P 500 is about 55%.
The average price target for Tesla stock among analysts is about $913 a share. That is up from about $662 only three months ago, but it is still roughly 10% below where the stock is trading. Wall Street average price targets typically imply gains of about 10% for stocks in the S&P 500.
Coming into Monday, Tesla stock was off about 3% year to date. Interest-rate fears have completely wiped out the 13% gain recorded on the first trading day of the year, after Tesla reported forth-quarter delivery figures that were far better than expected.