What happens to stocks if AI loses momentum?
Investing.com -- Brokerage firm Benchmark has hiked its price target on Tesla (NASDAQ:TSLA) to $475 from $350 following the successful launch of its robotaxi service in Austin, Texas.
Analyst Mickey Legg said the limited launch "demonstrates a controlled and safety-first approach" that could help Tesla gain regulatory and public trust. New Texas regulations on autonomous vehicles, set to take effect on September 1, are also expected to support broader deployment.
Tesla shares have rebounded sharply from their April lows, recovering 54% amid easing tariff concerns and optimism around autonomous mobility.
But Legg notes that the stock remains 33% below its December peak of $488, and reaffirmed Tesla as a top pick for this year.
“We are returning to our initial price target of $475 and believe our thesis remains intact. TSLA remains a Benchmark Top Pick for 2025,” he said in a Thursday note.
While Alphabet’s (NASDAQ:GOOGL) Waymo has a lead in the autonomous ride-hailing space, with operations in four cities and around 250,000 weekly rides, Legg believes Tesla’s approach is more scalable.
“We are a believer in TSLA’s camera-focused approach that is not only cost effective but also scalable,” he wrote, pointing to the higher cost of Waymo’s vehicles compared to Tesla’s Model Y.
Tesla is set to report its second-quarter deliveries next week, which are expected to show a year-on-year decline, but Legg believes this is already priced into the stock, with a rebound expected in the second half of 2025.
Looking ahead, the analyst sees growth drivers in the expansion of the robotaxi fleet, product refreshes, and the long-term potential of Tesla’s Optimus robots.
“In our view the company is undergoing an evolution from a trailblazing vehicle OEM to a high-tech automation and robotics company with unmatched domestic manufacturing scale,” he added.
Tesla ended the first quarter with $37 billion in cash and generated more than $600 million in free cash flow, which Benchmark said provides "plenty of fresh powder to fund growth opportunities down the road."
Benchmark’s new valuation is based on 53.9x estimated 2028 EBITDA, a premium to tech peers trading at 27.1x.