Tesla’s stock experienced a slight dip in early Tuesday trading, reducing its year-to-date gains to approximately 10%. This occurred despite a significant price target increase from a prominent Wall Street analyst ahead of the company’s fourth-quarter earnings release next week. Since the November 4th closing bell, Tesla’s market capitalization has surged by over $560 billion, making it one of the market’s top performers post-election. Investor confidence remains strong, fueled by CEO Elon Musk’s perceived close relationship with President Donald Trump and his influential advisory role within the administration.
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Analysts are optimistic about further growth driven by Musk’s ambitions in artificial intelligence, autonomous driving software, and robotics. These sectors could potentially benefit from relaxed regulations under the current administration, potentially counterbalancing the impact of shrinking profit margins and declining demand in the electric vehicle (EV) market. Despite substantial gains in China and global price reductions, Tesla recorded its first annual sales decline last year.
Piper Sandler analyst Alexander Potter raised his Tesla price target by $185 to $500 per share in a note published Tuesday. He suggests that investors are now “more willing to entertain upside scenarios” due to the potential of Tesla’s ‘real-world’ artificial intelligence applications.
Tesla’s AI Potential Outweighs Near-Term EV Market Uncertainty
Potter acknowledges the “highly uncertain” near-term outlook for Tesla, citing the slowdown in EV demand and questions surrounding the launch of a more affordable model later this year. However, he emphasizes the compelling nature of the company’s strategic shift towards AI-driven revenue. Potter projects Tesla will deliver approximately 1.96 million vehicles this year, an 11.4% increase from 2024, with over 100,000 units coming from undisclosed vehicles and an additional 70,000 from the Cybertruck.
Musk has consistently emphasized that Tesla’s long-term vision is more closely aligned with advancements in AI technologies, autonomous taxis (cybertaxis), energy storage, and robotics rather than traditional car manufacturing. He anticipates producing up to 2 million self-driving Cybercabs annually by 2026 and predicts 20% to 30% vehicle growth next year, barring unforeseen circumstances like major global conflicts or significant interest rate hikes.
Potter highlights that once Tesla completes its current product launches, the company’s focus will likely shift from introducing new vehicles to expanding the adoption of its Full-Self-Driving (FSD) software. His financial model incorporates contributions from FSD licensing and values Tesla’s existing businesses at just under $300 per share, including FSD.
Tesla: A Buy-and-Hold Opportunity for 2025 Despite Short-Term Volatility
Potter anticipates “choppy” trading for Tesla stock in the first half of the year due to uncertainties in the EV market. However, he maintains his conviction that Tesla remains a compelling “buy-and-hold” investment for 2025.
Tesla is scheduled to release its fourth-quarter earnings after the market closes on January 29th. Analysts predict earnings of 72 cents per share on revenue of $27.23 billion. LSEG data suggests a modest increase in gross profit margins to 18.85%. Tesla shares traded 3.5% lower in early Tuesday trading, at $411.70.
