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Tesla stock (NYSE: TSLA) is now down 40% this year and has lost almost half of its market cap from the 2024 highs. After the crash, while some analysts see the stock as a good buy, others see more downside on the horizon.
Today, TD Cowen upgraded Tesla from a “hold” to “buy” while assigning a target price of $388. “While we are valuation-/sentiment-minded when recommending stocks, we agree with the underlying notion that Tesla cannot be compared to other automaker stocks, not because it isn’t an ‘auto company’, but because it’s arguably best positioned to capture sizable opportunities that exist across auto/mobility and adjacent markets,” said analyst Itay Michaeli said in a note on Thursday.
TD Cowen Upgrades Tesla
Notably, Tesla’s valuation has always been a conundrum. The stock trades at over 100x its trailing earnings while other automakers barely trade at mid-single digit multiples. Tesla was valued at over $1 trillion at its peak and despite the crash, it is still valued higher than all leading automakers put together.
However, Tesla is also a software company building products like autonomous driving, robotaxis, humanoids, and even supercomputers. Tesla CEO Elon Musk previously said that the bulk of the company’s valuation is linked to its progress in autonomous driving. Over the long term, he is quite upbeat on the Optimus humanoid, which he believes is a multi-trillion-dollar revenue opportunity that can help make TSLA the biggest company in the world.
TSLA’s Autonomous Driving Business
Notably, Michaeli is also bullish on Tesla’s autonomous vehicle (AV) business and said, “We view the Consumer AV vertical as generally overlooked, with Tesla currently in the lead among automakers.”
He added, “Most of Tesla’s US fleet is concentrated in less dense counties where AVs could prove easier to deploy, and where both new business models and existing rideshare revenue (gross bookings) are available.”
Notably, several Wall Street analysts raised Tesla’s target price following Trump’s election, expecting easier regulations around autonomous driving, which, by Musk’s assertion, accounts for the bulk of the company’s valuations.
Tesla offers full self-driving (FSD) subscription for $8,000. Musk once said that the price for the service could rise to as high as $100,000 someday. That said, the company has had to cut the price by nearly half to boost adoption. With BYD offering assisted driving service for free, it remains to be seen whether other players will also cut prices on their autonomous driving software.
Tesla Will Offer Robotaxi Rides from April
Meanwhile, the name FSD is misleading as while the software is quite advanced, it is not L4 fully autonomous as the name might suggest. The nomenclature has been a point of contention with US regulators who accuse the company of deceptive marketing. Tesla is looking to offer robotaxi rides next month in Austin which would test the company’s autonomous driving capabilities.
The company unveiled its robotaxi at the “We, Robot” event in October 2024, which happens to be the first product that the Elon Musk-run company has unveiled since Q4 2019 when it unveiled the Cybertruck pickup whose deliveries began in November 2023 after many delays.
Not All Are Bullish on Tesla
Meanwhile, not all are bullish on Tesla, and Baird named it as a “bearish fresh pick,” with analyst Ben Kallo lowering his price target from $440 to $370. In his note, Kallo said, “Intra-quarter sales data from TSLA’s key regions lead us to believe there is risk to the consensus Q1 delivery estimate of 437.5K.”
He added, “Production downtime associated with the Model Y refresh complicates the supply-side of the equation while at the same time, Musk’s involvement with the Trump administration adds uncertainty to the demand-side.”
To be sure, concerns over Tesla’s core automotive business are not unfounded. The company’s US sales fell in January, which came after a YoY fall in 2024 – its first annual decline in its deliveries.
TSLA’s Sales Have Plunged in Europe
Europe has been another challenging marker for Tesla as Musk’s politics – especially his support for far-right candidates – seems to have worked to the detriment of the company.
TSLA’s sales in key European markets like Germany and Norway have plunged this year. While the sales decline towards the beginning of the year is seasonal as the company pushes sales towards the end of the year, and some buyers might have held back their purchases to buy the Model Y refresh, Tesla’s sales numbers have disappointed so far this year.
Moreover, Tesla is battling intense competition in China. Notably, there is already a fierce price war in the Chinese EV market as companies have been cutting prices and offering incentives to spur sales. The Chinese auto market is among the most competitive globally, and domestic players are increasingly taking market share from foreign brands like Volkswagen and Ford.
TSLA’s sales in China fell by almost half in February, even as BYD had yet another record month.
Musk’s Association with DOGE Could Be Hurting Tesla
Musk’s association with the Trump administration and his time commitments towards DOGE (Department of Government Efficiency) which he heads, has been making a section of the market apprehensive about the billionaire’s ability to devote adequate time at Tesla. Such concerns have been around for quite some time as apart from Tesla Musk also heads several other companies like SpaceX and Neuralink. Of late, he has added X and his artificial intelligence (AI) startup xAI to the ever-growing list of companies that he owns.
In his note, Kallo said, “We believe Musk’s involvement with DOGE and the Trump administration broadly may affect some buyers in the U.S. and Europe, which complicates the setup from a demand perspective.” He added, “Even if demand isn’t impacted, we expect the narrative of potential demand destruction to continue.”
The stock fell lost almost 30% in February, which turned out to be the second-worst month ever for the stock. The only time Tesla saw an even bigger drawdown was in December 2022, when concerns over Musk’s ownership of Twitter (now X) deepened the sell-off in TSLA shares.
Meanwhile, Tesla looks set to continue its dismal run, and the shares are in the red in US premarket price action today.
