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Goldman Sachs raises Tesla's (NASDAQ: TSLA) price target to $1,125 from $905 amid strong news that Hertz has ordered 100,000 Model 3 EVs. The firm is also pleased with the overall growth of the manufacturer's business.
Goldman Sachs analyst Mark Delaney raised Tesla's price target to $1,125 from $905 per share. He has confirmed its rating on the manufacturer's shares as Buy. Delaney raised his price target after major car rental company Hertz ordered 100,000 Tesla vehicles for its rental fleet. After completing this order, EVs will make up more than 20% of its fleet. Hertz also said it will supply 50,000 of these units to Uber drivers.
“We believe this news is important for Tesla, and while the 100K order is material on its own, we also believe that it will help the company to sustain strong growth and margins when considering the order in the context of other dynamics,” the note said.
The analyst clarified that the PT increase is not only due to news related to Hertz but also against the background of general business growth. As a part of "other dynamics," Delaney indicated that Tesla could gain additional fleet sales and also make more money from its charging stations as Tesla's fleet grows.
The large order should help Tesla maintain strong margins even as it builds out new factories, Goldman Sachs said. The Hertz deal could also prove to be just the start of a steady stream of orders from the rental company:
“We expect there to be continued opportunities in this channel. Hertz typically only holds vehicles for a few years per its filings, suggesting additional sales over time, and this news could also incentivize other rental fleets to shift more quickly toward EVs,” Delaney said.
In addition, Delaney increased his 2022 and 2023 full-year earnings-per-share estimates by about 65 cents and $1.50, respectively, to $9 and $10.50, excluding stock-based compensation, which the Street usually backs out when communicating Tesla earnings estimates.
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