Monday - New Street Research has upgraded Tesla (NASDAQ:TSLA) stock from Neutral to Buy, setting a price target of $460. Analysts at the firm identify the upcoming launch of lower-cost Tesla models and stabilizing gross margins as key growth drivers.
With current gross margins at 18.23% and a stock price of $410.44, they anticipate that Tesla's efforts to reduce costs in line with price reductions will bolster the company's financial performance. InvestingPro analysis indicates Tesla is currently trading above its Fair Value, with analyst targets ranging widely from $120 to $528.
The upgrade is also influenced by the progress in Tesla's Full Self-Driving (FSD) technology. New Street Research suggests that Tesla could initiate the testing of partially unsupervised FSD and robotaxi fleets within the year.
While acknowledging the challenges in reaching large-scale deployment, the analysts believe that the stock price will start to reflect the potential of these developments more accurately. Tesla's strong momentum is evident in its 72.82% return over the past year, though investors should note its high volatility with a beta of 2.3. For deeper insights into Tesla's valuation and growth prospects, InvestingPro subscribers can access comprehensive Pro Research Reports covering 1,400+ top stocks.
The firm's long-term outlook for Tesla is optimistic, with a projection that the company could achieve a market cap of $4.7 trillion by 2030 if it successfully dominates the robotaxi market. Although they consider this scenario to be a long shot, the movement towards it is seen as a justification for potential stock price increases, despite the high multiples on near-term earnings.
New Street Research notes that the near-term outlook for Tesla does have uncertainties, such as weak demand and the timing of new model releases, which could put pressure on the stock.
However, they view these potential dips as opportunities for long-term investors. The firm concludes that the risk-reward profile of owning Tesla shares is positive, with a strong recommendation to buy at the newly set price target of $460.
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