By Michael Elkins
Electric vehicle maker Tesla (NASDAQ:) traded higher on Tuesday ahead of market following a note from an analyst at Goldman Sachs (NYSE:). The analyst reiterated his buy rating and $333.33 price target on TSLA after meeting with the company’s vice president of investor relations, Martin Viecha.
Tesla believes consumers will increasingly turn to EVs, although it’s too early to quantify the effects of the recently signed Inflation Reduction Act (IRA). The analyst believes consumers will be drawn to electric vehicles the same way they’ve been drawn to other technological inflections (eg, from CRT TVs to LCD TVs, and feature phones to smartphones) . However, the electric vehicle industry could be supply-constrained in the medium term, as the supply of new batteries and components and assembly take time to set up.
Software and services, especially FSD, remain a priority for the company, which continues to develop software and services to monetize the growing installed base of connected vehicles. Tesla considers FSD to be one of the most important efforts in this category, and the company is aiming for wide release of its beta software in North America this year.
The analyst wrote in his note that he believes “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) is well positioned to benefit from the long-term shift to EVs. We expect Tesla to increase its margins in the medium term, due to the ramp-up of the major Model Y and new factories in Berlin, Germany, and Austin, Texas, and long-term, due to increased software revenue. “
Tesla is up 0.88% in pre-market trading on Tuesday.