Electric vehicle pioneer Tesla got a big boost of confidence from Wall Street Wednesday. Goldman Sachs says buy shares now.

“We expect 2020 [industry] fundamentals to be very challenging cyclically,” wrote analyst Mark Delaney in a Wednesday research report. Challenging is an understatement. Auto sales plunged more than 30% in March and steeper declines are expected in April. “Investors [should] be selective with the group and own stocks that we expect to benefit from key long-term secular growth areas like EVs.”

Despite the Covid-induced headwinds, Delaney sees global electric vehicle penetration growing from 2% of global annual light-vehicle sales in 2019 to 15% by 2030. That means, roughly, Delaney expects EV sales would grow from about 2 million a year to 15 million over the next decade. Tesla is the “clear market leader” in EVs, according to the analyst and he values Tesla stock (ticker: TSLA) at $864, more than 20% higher than recent levels.

Tesla stock is up on the news, rising about 3.5% in Wednesday morning trading. The stock has been on a tear lately—trading it its own universe—seemingly unaffected by Covid-19 fears. Shares are up 24% for the week and 70% year to date, far better than comparable moves of the Dow Jones Industrial Average and S&P 500.

Short covering and analysts upgrades are often cited when trying to figure out what is moving shares. Fundamental factors such as strong earnings, new products, and growing manufacturing capacity also matter. But traders also love highly volatile stocks. Large price swings means more opportunity for trader to move in and out of positions, hopefully capturing larger-than-average trading profits. That is another reason huge rallies, or steep declines, can feed on themselves.


(A short bet is when bearish investors borrow and sell stock, hoping for near-term price declines. Tesla is a controversial stock. Far more shares of Tesla have been sold short than the average company in the S&P 500, of which Tesla isn’t a component.)

Tap to View

The Buy recommendation isn’t an upgrade. Delaney is a launching coverage of the automotive group for Goldman. Along with his Tesla recommendation, Delaney also likes Aptiv (APTV). He rates Ford Motor (F) and General Motors (GM) at the equivalent of Hold.

“Companies are generally much better positioned in terms of balance sheets and cash flow than the [2008-09] downturn,” wrote Delaney. “We see broad-based downside to Street estimates.” Falling earnings numbers keeps him on the sidelines for most of his names under coverage.

Goldman is making a bold call on Tesla. Only about one quarter of analysts covering Tesla stock are bullish, far lower than the average 55% Buy-rating ratio for stocks in the Dow. What’s more, the average analyst price target is about $500, far lower than Delaney’s $864 price target.


The Tesla bull-bear debate won’t end soon. What both sides can likely agree on is stock volatility will remain high.

Next up for analysts, investors, short sellers, and traders will be first-quarter earnings. Wall Street expects the company to lose about 25 cents a share from $6 billion in sales.

Write to Al Root at allen.root@dowjones.com