Tesla Stock Rally: Analyst Insights and Market Sentiments

Tesla stock (TSLA) has risen in value due to conflicting views from Wall Street analysts. The company’s trajectory, often debated beyond its automaking roots, has resulted in differing opinions on its valuation and future potential.

Tesla’s Beyond-Auto Narrative

For years, Tesla supporters have argued that the company’s capabilities go far beyond traditional automobile manufacturing. While Tesla has a strong presence in the energy sector and is actively advancing in AI and other fields, its financial foundation has been based primarily on its auto business.

Despite Tesla’s diverse endeavors, Wall Street has primarily focused on its financial performance when assessing its automotive performance. Morgan Stanley’s Adam Jonas has been one of the proponents of including Tesla’s other ventures in its valuation. Morgan Stanley’s target price for Tesla ranges from $120 in the worst-case scenario to $380 in the best-case scenario, with a bullish estimate of $550. The analysts brought the concept back into focus in a new note to clients today:

Many investors still debate the merits of Tesla as ‘more than an auto company.’ In our opinion, Tesla is definitely an auto company. It is also an AI company. Think ‘and’ not ‘or.’

To back up his point, Jonas stated that only 33% of Tesla’s $380 price target is related to the automotive industry:

In our opinion, Tesla is far more than an auto company. Of our $380 price target, our valuation of the ‘core’ auto business is $86/share, leaving 77% of our target derived by Network Services, Mobility, 3rd-party battery/FSD licensing, Energy and Insurance. We receive significant pushback from our clients for including non-auto revenue streams in our valuation. Our OW thesis is highly dependent upon these business lines becoming far greater drivers of earnings with clear milestones/proof-points backed by accompanying financial disclosures.

Bullish Outlook

Wedbush analyst Dan Ives reiterated his bullish outlook for Tesla, raising his price target to $350 while maintaining an Outperform rating. Ives anticipates that Tesla will increase its market share in electric vehicles, particularly in China, and that margins will stabilize despite price pressures. The optimism stems from expectations that Tesla’s Full Self-Driving capabilities will evolve with advances in AI technology.

Drawing parallels to Apple’s past growth, Ives predicts Tesla could reach a $1 trillion market cap by 2024, despite growing skepticism elsewhere on Wall Street.

Bearish Sentiments and Caution

On the other hand, RBC Capital Markets’ Tom Narayan is more cautious, slashing Tesla’s fourth-quarter delivery estimates. He cites downside risks to consensus expectations, which could impact Tesla’s annual deliveries. According to Narayan’s estimates, there could be a shortfall due to weakened registration data, and potential customers could pull forward due to impending tax credit changes.

Analysts’ differing perspectives are reflected in Tesla’s stock movement. While some remain optimistic, anticipating market expansion and technological advancements to propel the company’s growth, others are more pessimistic, focusing on potential delivery setbacks and market uncertainties. As the year-end reporting period approaches, the market eagerly awaits Tesla’s performance figures to gauge its trajectory in the coming quarters.