Analyst advised to buy Tesla stock and raised target by 70%. Is the crisis over?

Analyst Baird upgraded Tesla's stock rating from neutral to "buy" and expects it to grow by another third. In his assessment, Elon Musk's prospects for the company as an automaker remain dim, but market participants are increasingly betting on its long-term potential in robotics and robotaxis. Analyst Ben Kallo believes that Tesla is capable of meeting its ambitious goals by 2035, and its market capitalization could rise to $5.5-12 trillion.

Baird senior analyst Ben Kallo upgraded Tesla's stock rating from Neutral to Outperform ("above market," equivalent to a "buy" advice) and increased the target price from $320 immediately to $548, MarketWatch reports. The new target suggests the company's market value is up nearly a third from its Sept. 18 close.

Kallo has become more optimistic about Tesla's prospects while it has failed to meet Wall Street's sales expectations for three consecutive quarters. Baird predicts that they will decline again in 2025 and that fundamentals will be volatile in the short term, Investing.com adds. However, the analyst believes Tesla is increasingly less seen solely as a carmaker and more as a company with long-term potential in robotics and unmanned cabs.

Kallo believes Tesla stock will outperform the market as the company's long-term goals are met. It's not just about car sales, but also about developing the "physical AI" business. According to Baird's calculations, Tesla will be able to meet each of its key goals between 2026 and 2035: sell 20 million cars (versus an expected 8.7 million by the end of 2025), connect 10 million active subscriptions to full autopilot, release 1 million "bots," including the Optimus robot, and launch 1 million robot cabs. According to analyst Baird, Tesla will be able to achieve the latter goal by connecting cars owned by customers to the network, which will allow it to quickly scale its fleet.

If the company meets all of its goals, Baird's scenario suggests that its capitalization could exceed $5.5 trillion by 2035, which corresponds to a share price of around $1412. In the analyst's bullish forecast, which assumes a doubling of volumes, Tesla is theoretically capable of reaching a market value of $12 trillion and a share price of $3043. At the same time, Kallo clarified that this option is far from the base case, and with a high probability the final figures will be somewhere between these two scenarios.

In trading on September 19, shares of Tesla jumped by 2.7% to $428.4. Over the past month, the market value of the company has increased by almost 30%. The rally had several drivers, notes Barron's. They include Elon Musk's purchase of nearly $1 billion worth of Tesla shares, a 0.25 p.p. cut in the Fed Funds rate, which is positive for automakers, and expectations of a robotaxi launch in Las Vegas after the start in Austin in June.

Nevertheless, since the beginning of the year, Tesla securities are still up only by 6%. For comparison: the main U.S. stock index S&P 500 for the same period added about 13%.

On Thursday, Goldman Sachs analyst Mark Delaney also raised his target price on Tesla shares - from $300 to $395 - but kept his neutral rating, CNBC reports. At the same time, his new target implies a decline in quotes by about 5% from the close on September 18. Delaney explained the revision by the growth of market multiples on Tesla securities, expectations of higher long-term revenue of the company and improved forecasts for earnings per share. But the analyst also sees risks: if competition will limit margins (as is already happening in the Chinese market of driver assistance systems) or the company fails to cope with the implementation of its projects, the stock could fall.

In the short term, Goldman Sachs expects Tesla's deliveries in the third and fourth quarters to exceed forecasts, helped by the launch of a new version of the Model Y, improved consumer sentiment and tax incentives for the purchase of electric vehicles in the U.S., valid until the end of September 2025. In the long-term scenario, Delaney also bet on the development of robotics and autonomous driving, which, in his opinion, can significantly increase Tesla's profits. The expert predicts that by 2030 earnings per share could reach $20 (against the base scenario of $7-9).

In general, Wall Street's opinions on what to do with Tesla shares are divergent. Buy them advise 47% of analysts, 33% are neutral, and the rest suggest selling, follows from the data of MarketWatch. The consensus target price is $327.6 - down 21.5% from the last close on Sept. 18.

This article was AI-translated and verified by a human editor