Goldman Sachs Raises Price Target on Tesla Motors

4 years ago by Inside EVs Staff 7

Tesla Model S

Tesla Model S

Prior to the third fire involving a Tesla Model S, Goldman Sachs raised its target price for TSLA.

Model S

Model S

Goldman Sachs presents one of the least optimistic outlooks out there for Tesla Motors, so “raised” certainly doesn’t mean that the new target is high.

According to Goldman Sachs, the new target price for TSLA is $104.  That’s up from the previous target of only $95.  The rating on the stock is “neutral.”

It should be noted though that Goldman Sachs was one of the few financial advisory group to actually raise the target on TSLA following the November 5 release by Tesla of earning for Q3.

So, Goldman Sachs obviously saw some positive results posted in Tesla’s Q3 report, or otherwise it would not have raised the target price.

We should further add that Tesla CEO Elon Musk believes that TSLA is overvalued at the moment, so perhaps the figure put forth by Goldman Sach is more accurate?

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7 responses to "Goldman Sachs Raises Price Target on Tesla Motors"

  1. PJS says:

    Until Tesla can overcome the battery supply problem I believe this stock price is too high. The fires are just another obstacle to knock it down another notch. $90-95 is more realistic, IMO. Increased production, building a battery plant, developing new models and tooling up for them – all cost money, and won’t happen producing 550 cars a week. It’s a catch-22 and Tesla has not given good guidance as to how they will get out of it. Elon even states, often, that the stock price is too high, and he should know, shouldn’t he?

    1. Jouni Valkonen says:

      I agree, Investors just looked Tesla’s infinite demand and pushed the stock into $194, but they forgot that Tesla is seriously supply limited so that ramping up the production fast enough is just impossible.

      My thoughts are that Tesla cannot solve its battery supply problem without a gigafactory and this means one or two billion extra investment spending. Even if Tesla can secure another cheap government warranted loan for the gigafactory, this is very expensive for small company. This will prevent too unrealistic stock prices.

      Although the huge growth potential is there and Tesla will eat the Big Oil for lunch, Tesla cannot issue dividends for years, because all the revenue goes for investments on growth. This prevents the $TSLA stock to get too highly valued. I think that 100–150 dollars is reasonable valuation for the next four years.

      1. pjwood says:

        The stock market has been blind to dividends for well over a decade. I see the light, but many still think dividends are “for sissy’s”.

        Musk has a stable business with the S. Resales will be excellent for the simple fact that supply is limited, and this car now more clearly has a global market.

        Goldman is right there, to underwrite financings, for things like the 12 billion dollar “energy east” pipeline, that will help TransCanada take tar sand oil and move the sludge to the east coast. That one is the “what if” scenario if the meager 5.4bb Keystone XL line fails to get approval. If that ever happens, they don’t want some battery maker in the way. So “$104” it is. Oil, well, on the other hand they miraculously saw oil’s price going to $200 during the summer of 2008. How did that work out for us?

        Beware, the Squid.

        1. Jouni Valkonen says:

          That is perhaps true that dividends are for sissies. The bubble economy gives faster profits and tax payers will clean up the mess.

  2. Chris O says:

    Sounds more realistic than the $190 Tesla’s stock reached at its top. Tesla would have to sell hundreds of thousands of cars at a nice profit to warrant an $20 billion+ market cap and frankly I think it takes a major battery breakthrough for that to happen.

    What worried me in the 3d quarter financial report was that Tesla thinks there is not much scope for improvement on Model S’ current 21% gross margin. Maybe Tesla means only in the short term by that but if by 2017 it still costs ~$70K (or anywhere near that really) to build a Model S it’s beyond me how they could offer a 200 mile car for $35K by that time. It would mean offering a vehicle that’s bound to have ~80% of Model S’ material and component bill at 50% of what it costs to build a Model S.

  3. Bonaire says:

    They have a few problems and that price of the $100 range seems viable for 2014.

    The 10-Q came out on Friday and anyone can read the long-list of risks that Tesla presents as possible headwinds for them. One is the battery fire risk – and they say they only designed to isolate fire from one single cell in a pack but perhaps now with the fires in the press, this will become a larger risk written up in the next 10-Q and annual report.

    Biggest risk is the potential decrease in free cash based on the number of risks written in the 10-Q regarding the Sr. Notes that they may see being converted either now in Q4 or longer-term if the stock price climbs up again at the end of the quarter.

    I honestly don’t believe they are battery restrained “now”. They seemed to say that batteries are a constraint for “future growth”. If they intend to ship 50K units a year, then current contracts with suppliers will be stretched.

    I also believe that even though they make less profit on the 60-kWh unit – they should build and ship more of them as loaners so that they can also sell them via their new “sales presence” at the service centers. MS 60s do not require as many batteries. Built four 85’s or five 60s. That is 25 more cars with the same battery count if you extrapolate it out.

    1. Bonaire says:

      (meant 25% more cars)
      And since Goldman Sachs were paid to be a hedge against the Sr. Notes, don’t they have some kind of vested interest in manipulating the stock price based on various factors?