Tesla Is a Goldman Sachs Top Pick for 2022. The Stock Is Dropping Anyway
Jan 10, 2022
Wall Street is becoming more upbeat on Tesla shares, but the increased confidence among analysts hasn't been enough to boost the price, given investor concerns about increasing interest rates.
Goldman Sachs analyst Mark Delaney raised his price objective for Tesla shares from $1,125 to $1,200 on Sunday while retaining a Buy rating. Tesla was also deemed a high pick for 2022 by Delaney.
Delaney believes Tesla is the market leader in electric vehicles and that the electric vehicle trend will intensify in 2022.
And the industry's tendencies look to be beneficial. In China, EVs' percentage of new-car sales hit 20% in 2021, while the ratio is already far above 10% in Europe. Although electric vehicle penetration in the United States is only approximately 3% of new vehicle sales, additional EV models are entering the market this year, including pickup trucks like the Ford Motor (F) F-150 Lightning, Rivian Automotive (RIVN) R1T, and, of course, the Tesla Cybertruck.
However, price targets do not necessarily have the same impact as changes in analysts' stock ratings, and the long-term headwinds facing growth stocks, in general, are strong at present.
Tesla stock was down 3.6 percent in early trade, as worries of increasing interest rates continued to batter high-growth stocks. The Nasdaq Composite was down 1.7 percent just after the opening, while the S&P 500 and Dow Jones Industrial Average were down 1.1 percent and 0.6 percent, respectively.
Increased rates are more harmful to highly valued growth stocks than to others, as these corporations are projected to generate the majority of their earnings and cash flow far in the future. The more rates go up, the less cash is worth in today's terms, and the fewer investors may be ready to pay for those equities.
A second issue, which Delaney pointed out, is that EV sales won't grow as A second difficulty, Delaney noted, is that EV sales will not expand at the rate he anticipates. That is a basic danger that the EV business will always face.
Delaney, meanwhile, remains a Tesla bull. Overall, 45% of analysts rank Tesla shares as Buy, while the middle edge of the Buy-rating ratio for stocks in the S&P 500 is about 55%.
Analysts' average price prediction for Tesla is around $913 per share. This is an increase from around $662 three months ago, although it is still roughly 10% below where the stock is trading. Wall Street's average price estimates generally predict gains of around 10% for equities in the S&P 500.
Tesla's shares were down approximately 3% year to date, heading into Monday. Concerns about rising interest rates have totally erased the 13% gain achieved on the first trading day of the year, after Tesla's release of fourth-quarter delivery data that were far better than expected.