Tesla Motors (TSLA) shares are rallying after Goldman Sachs upgraded the electric vehicle maker’s stock, saying that its current valuation is not pricing in the company’s “disruptive potential.”

BUY AFTER PULLBACK: After Tesla’s stock tumbled 23% in the wake of the company’s launch of its “mass market” Model 3 sedan, the shares are “not fully capturing the company’s disruptive potential,” wrote Goldman analyst Patrick Archambault. Tesla has received more orders for the Model 3 than Archambault had expected, and the risk of a recession in the U.S. appear to have diminished in recent months, the analyst stated. Although Tesla’s sales targets are “ambitious,” investors have taken a more conservative view, according to Archambault. The analyst believes that the next near-term catalyst for Tesla could be increases in the sales of its Model X SUV. Despite limited progress by the company on this front in April and May, many on the Street are expecting the automaker to reduce its delivery target for the vehicle, wrote Archambault. The analyst believes that “any positive news” relating to production of the vehicle “would strongly support the shares.” He kept a $250 price target on the name.

PRICE ACTION: In morning trading, Tesla rose 4.5% to $213.78 per share.

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