Tesla stock at $780? It could happen says Goldman Sachs

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Talk about an upgrade.

Tesla got a major boost this past week as analysts at Goldman Sachs upgraded the stock from neutral to buy, driving their 12-month price target from $455 to $780.

That’s capped a run of positive news for the company, including its fifth consecutive quarter of profits, the announcement that it would be added to the S&P 500, and of course Elon Musk being named Fortune‘s Businessperson of the Year.

Goldman’s analysts cited a few reasons for their change of heart. They believe EV adoption is accelerating due to battery prices falling faster than they had expected, combined with an increase in regulatory proposals to limit or ban the sale of internal combustion engines over the next few decades. As a result, the analysts “now expect EVs to comprise 18% of sales globally in 2030 and 29% in 2035 (with 50% adoption in 2035 in both the US and in Western Europe).”

The incoming Biden administration also bodes well for Tesla’s prospects. “Using the prior Obama plan of ~55 MPG of corporate average fuel economy by 2025 as a starting point for analysis purposes, we believe that companies may need a double digit percent of sales to come from EVs to comply with stricter emissions standards (especially if there is no bonus treatment for EVs in the calculation),” the report states. What’s more, the Goldman analysts also suggest Tesla’s Energy and FSD (full self driving) businesses could be worth more than previously assumed.

Though Goldman’s price target of $780 might strike some as overly bullish, they aren’t the only ones feeling optimistic. Wedbush analyst Dan Ives also upgraded the stock last week, sticking a “bull case” target of a $800-$1,000 on TSLA shares (his 12-month target, meanwhile, is below Goldman’s at $560). As my colleague Anne Sraders wrote, “electric vehicle demand ‘is really starting to inflect, especially in China,’ Ives tells Fortune. He notes globally 3% of auto sales are EV, and ‘We think that now has potential to be 10% by 2025. With Tesla being the clear leader, we believe China could represent 40% of sales by 2022, up from 15% today.’”

To be sure, every analyst report about Tesla is filled with caveats and risk factors, and as my colleague Shawn Tully has written about extensively for Fortune, there are fundamental questions about Tesla’s business model and it’s over-reliance on the business of selling emissions credits.

That said, the Goldman report also highlights how tough it has been to bet against Tesla this year. The analysts write that they had downgraded the stock in June after Tesla lowered prices more than had been expected and there had been some reports of manufacturing challenges with the Model Y. “This concern that we had about a 2H20 growth slowdown was incorrect, and since our downgrade on 6/11/20 the stock is +192% vs. the S&P 500 +22%,” they wrote.

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