TD Cowen maintains Tesla stock buy rating and $388 target

On Wednesday, TD Cowen analysts reaffirmed their Buy rating and $388.00 price target for Tesla (NASDAQ:TSLA) stock, addressing concerns about the potential impact of a growing political divide on the electric vehicle maker’s near-term (NT) demand. The analysts acknowledged the legitimacy of these concerns but pointed out that Tesla could see a net increase in sales over time if it loses market share in politically Blue counties but gains in Red ones. This analysis comes as Tesla’s stock has experienced significant volatility, with a YTD decline of 44% despite maintaining strong financial health according to InvestingPro metrics.

The report titled "Brand Destruction or Reconstruction?" delves into U.S. county data and presents three different modeling scenarios. In two of the three scenarios, Tesla’s projected future (PF) U.S. sales are expected to rise, largely due to the significant potential for electric vehicle market growth in Red counties, which are currently under-penetrated by EVs. The base scenario anticipates Tesla gaining more than 100,000 units in the long term, while the aggressive and conservative scenarios project gains of 490,000 and losses between 11,000 to 37,000 units, respectively. These projections align with InvestingPro data showing Tesla’s expected revenue growth of 14% for FY2025, though the company currently trades at a relatively high P/E ratio of 105.

The analysts suggest that while Tesla may face short-term headwinds, particularly with a challenging first quarter, the company’s expansion into regions with low EV penetration could offset losses in areas where it currently has a strong presence. This analysis underpins TD Cowen’s continued endorsement of Tesla stock, particularly beyond the first quarter, as they anticipate post-Q1 catalysts to drive growth.

In summary, TD Cowen’s position reflects a belief in Tesla’s resilience and potential for long-term sales growth, despite the current political climate’s potential to influence consumer preferences and demand in the short term. The firm’s analysis indicates that Tesla’s strategy to target untapped markets could ultimately prove beneficial for the company’s sales figures.

In other recent news, Tesla has secured initial approval from California to potentially launch a robotaxi service, marking a significant step forward in its efforts to enter the autonomous vehicle market. This development aligns with Tesla’s broader mission to innovate within the automotive industry, though further approvals are needed before the service can officially commence. Meanwhile, Mizuho (NYSE:MFG) Securities has adjusted its outlook on Tesla, reducing the stock price target to $430 from $515 due to challenges in sales across key markets like the U.S., EU, and China. The firm cites geopolitical tensions and increased competition as factors contributing to the decline, while still maintaining an Outperform rating for Tesla. Tesla’s sales in China have notably dropped by 49% year-over-year, contrasting with the market’s 85% surge. In the U.S., Tesla’s sales decreased by 2% against a 16% market increase, and in Germany, sales fell by 76% compared to a 31% market rise. Despite these setbacks, Mizuho remains optimistic about Tesla’s leadership in the electric and autonomous vehicle sectors. These recent developments highlight Tesla’s ongoing efforts to expand and adapt in a rapidly changing industry landscape.

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