Why Goldman Sachs is staying super bullish on the Elon Musk-led Tesla

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Despite a sharp sell-off in the past month, Goldman Sachs is staying bullish on Tesla stock.

“We believe that Tesla, given its leadership position in EVs (including its vertical integration and tight coupling of hardware and software, as well as its ecosystem of charging stations and brand), and its focus on clean transportation more broadly (given its solar and storage businesses) will be best positioned to capitalize on the long-term shift to EVs,” Goldman Sachs analysts wrote in a new paper looking at winners from the shift to autonomous driving.

Goldman reiterated a buy rating on Tesla shares with a $305 price target, which assumes about 45% upside from current levels.

“We expect Tesla to expand margins in the medium term as it ramps the important Model Y product as well as new factories in Berlin, Germany and Austin, Texas, and in the long-term as it increases its mix of software revenue,” the analysts added.

The vote of confidence comes amid a volatile few weeks for Tesla’s stock and CEO Elon Musk.

Shares have tanked about 28% in the past month, reflecting several concerns that range from the high beta EV stock being hit with the broader market retrenchment on interest rate hike fears to threats of a U.S. recession impacting consumer demand for big-ticket autos.

On the latter point, auto sales fell slightly in the September retail sales report released on Friday, echoing recent downbeat commentary on auto demand from the likes of Ford and CarMax.

Musk, meanwhile, remains locked in a battle for Twitter — raising concerns that he will be distracted on execution at Tesla.

Tesla Inc CEO Elon Musk walks next to a screen showing an image of Tesla Model 3 car during an opening ceremony for Tesla China-made Model Y program in Shanghai, China January 7, 2020. REUTERS/Aly Song

Taken together, those factors have contributed a 40% YTD slide for Tesla’s much-loved stock.

Not all investors are heading for the door on Tesla, of course. Long-time Tesla bull Cathie Wood remains very upbeat on the company and Musk.

“Certainly all stocks are experiencing difficulty in this environment as the market tries to understand how far the Fed is going to go and how deep this recession is going to be. So Tesla is a solution to the problem,” Wood exclusively told Yahoo Finance Live. “We think that gas-powered vehicles are going to be obsolete within the next 5 to 10 years. And the traditional auto industry has to figure out a way to migrate into electric vehicles and into the next big phase, which we think Tesla is leading, the autonomous taxi platform phase.”

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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