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Wednesday saw Wolfe Research reiterate a Peerperform rating for Tesla stock (NASDAQ:TSLA), amid a challenging outlook for the electric vehicle giant’s core automotive business. The firm highlighted Tesla’s year-to-date share price decline of 43%, which stands in stark contrast to the broader S&P 500’s 5% drop, U.S. legacy automakers’ 7% decrease, and fellow EV manufacturers Rivian (NASDAQ:RIVN) and Lucid Motors (NASDAQ:LCID), which have fallen by 19% and 37% respectively.
According to Wolfe Research, Tesla faces a tough short-term environment, particularly in the first quarter of 2025. The company’s challenges include the costs associated with new launches, evident demand issues, potential shifts in U.S. policy, and limitations in battery supply. The analysts noted that Tesla is currently experiencing a lack of significant catalysts and ongoing brand challenges that may hinder the company’s ability to fully utilize its automotive production capacity. InvestingPro data reveals that Tesla maintains a weak gross profit margin of 17.86%, though it holds more cash than debt on its balance sheet, providing some financial flexibility during this challenging period.
Despite these near-term concerns, Wolfe Research believes that investor confidence in Tesla’s future will largely hinge on the company’s advancements in artificial intelligence (AI) and Full Self-Driving (FSD) capabilities. The potential of Tesla’s Robotaxi service was underscored, with Wolfe Research’s proprietary model suggesting that Robotaxi revenues could reach $80 billion by 2035, boasting high EBITDA margins in the 60% range and potentially adding $70-$80 per share based on a discounted cash flow (DCF) analysis.
Looking further ahead, the firm anticipates Tesla’s Optimus humanoid robot to increasingly capture investor interest, particularly as the company plans to begin selling the robot to other businesses. Production of Tesla’s second-generation robot is expected to commence in the second half of 2026, which could mark a significant milestone for the company’s diversification into robotics.
In other recent news, Tesla has faced a series of analyst revisions and company developments. Guggenheim Securities reduced its price target for Tesla to $170, maintaining a Sell rating due to concerns about first-quarter deliveries and margins, with forecasts for 2025 deliveries significantly lowered. Evercore ISI also cut its price target to $235, citing broader market concerns and specific challenges for Tesla, including skepticism about autonomous vehicle advancements and potential brand erosion. In contrast, Wedbush Securities maintained an Outperform rating with a $550 target, emphasizing the need for CEO Elon Musk to focus more on Tesla amid protests and his involvement with external initiatives.
Tesla announced plans to double its U.S. vehicle production over the next two years, as revealed by CEO Elon Musk during a White House appearance with President Donald Trump. This comes amidst ongoing "Tesla Takedown" protests and discussions about acts of violence against Tesla dealerships being classified as domestic terrorism. Despite the recent uptick in premarket gains, concerns linger among investors about the stock’s future trajectory. These developments highlight the complex landscape Tesla navigates as it addresses both internal and external challenges.
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