Tesla (NASDAQ:TSLA) stock has long been at the center of an argument on Wall Street that has revolved about how it should be valued. Should it be viewed as a carmaker, albeit a pioneer of EVs (electric vehicles) or is it rather a tech disruptor with cars merely representing the first step on the path to much bigger things?
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
Tesla’s valuation – now and in the past – does not reflect its status as a carmaker. For instance, Toyota remains the best-selling car brand in the world, far outstripping Tesla’s sales, but its $252 billion market cap is dwarfed by Tesla’s $1.1 trillion valuation.
However, Tesla’s valuation is tied to other endeavors, namely its autonomous driving potential, with investors wagering on its large-scale adoption. Wedbush analyst Daniel Ives is a vocal TSLA bull, and he believes that valuation is entirely merited. In fact, Ives thinks the autonomous opportunity is “worth $1 trillion alone for Tesla.
That is despite the autonomous story still being in the early stages. The company has launched its robotaxi in Austin, Texas, and has now expanded to the San Francisco Bay Area, although it should be noted that a Tesla employee is still present in the car to make sure nothing goes wrong, and the vehicle is restricted to specific geographic areas. Additionally, it is currently available only to early access users by invitation. Nevertheless, Ives thinks huge expansion is on the way.
“We continue to believe that TSLA will begin launching its Robotaxi capabilities across multiple cities (~25 cities over the next year) in the US & abroad over the next 12-18 months as the company goes all in on the AI vision,” the analyst said.
With its AI future being the main focus for long term investors, Ives thinks TSLA shares are primed for upside. The analyst rates the stock as Outperform (i.e., Buy), backed by a Street-high $500 price target, implying the shares will post growth of ~50% in the months ahead. (To watch Ives’ track record, click here)
That said, Ives might be betting on Tesla’s big autonomous ambitions, but the company’s revenue is still tied mostly to car sales and here Tesla has been struggling badly this year. The most recent quarter showed dwindling revenue and profits while the company faces headwinds in the shape of the expiration to the U.S. EV tax credit, the impact of tariffs and the prospective loss of the sale of regulatory credits.
This brings us to Guggenheim analyst and TSLA bear Ronald Jewsikow, who, when assessing Tesla’s value proposition, in contrast to Ives, ascribes “no explicit value to FSD (beyond Robotaxi), robots, or other ancillary businesses such as insurance.”
And while CEO Musk has indicated the Austin Robotaxi operations will open to the public next month, Jewsikow thinks the bulls are still ignoring a glaring issue: “While safety drivers will remain, and no timeline has been provided for their removal, bulls have been willing to overlook the optics of safety drivers in TSLA vehicles, and we see no reason why that would change now.”
Bottom line, Jewsikow rates TSLA shares a Sell, while his $175 price target factors in a one-year slide of ~48%. (To watch Jewsikow’s track record, click here)
The Street’s overall view lies somewhere in between these two extremes; based on a mix of 14 Holds, 13 Buys and 8 Sells, the analyst consensus rates the stock a Hold (i.e., Neutral). Going by the $306.42 average price target, the shares have overshot by 8%. (See Tesla stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.