The daily flow of analyst upgrades and downgrades on Wall Street is coming out rapidly as the start of 2025 has kicked off. Wall Street analysts are now changing their 2024/25 models to 2025/26 models. This all means that changes are being shown on ratings, price targets, earnings estimates and other metrics which investors care about.
Tesla Inc. (NASDAQ: TSLA) is perhaps the most curious of all Magnificent Seven (Mag7) stocks. Wall Street has always had a very hard time modeling the valuations. As the leader in North American Electric vehicle sales, is Tesla really a car company like Ford and GM? Or is it a car company that has a lot of AI, robotaxis coming, robots coming and a major business in power backup modules?
Tesla’s stock saw three different analyst calls on Tuesday alone:
- Tesla was downgraded to Hold from Buy at BofA Securities based on valuation and execution risks, but the price objective was raised to $490 from $400 in the same call.
- Tesla was reiterated at Buy with price target raised to $492 from $11 at Stifel.
- Tesla was raised to Buy from Hold with $460 target at New Street Research.
The biggest analyst call is the one from BofA Securities because they have such a wide degree of customers under the Merrill platform. And the most interesting aspect of this formal downgrade is that the price target did not just go up — it was raised handily and represents close to 20% in implied upside.
BofA’s John Murphy is the analyst behind the call. Since BofA’s upgrade in April 2024 (with just a $220 price target on the initial upgrade date), Tesla’s news flow and investor sentiment have shifted more positively. Murphy is noting that catalysts around future growth drivers have been more fully recognized. That latest is the Robotaxi.
BofA’s latest valuation analysis was what raised its price objective to $490 from $400. The report said:
While this still implies upside, execution risk is high and Tesla is trading at a level that captures much of our base case long-term potential from core autos, robotaxi, Optimus, and energy generation & storage. We move to Neutral… we also update estimates to reflect our latest analysis of Tesla’s different businesses.
All of the individual notes come from the 16 pages of data and have been summarized to include some of the more broad-based points. One outside observation was that the word “Trump” did not appear once in a screen of the entire report.
The big call here is that Tesla’s robotaxi business is now set to account for 50% of the total valuation. BofA says the launch that is expected in 2025 could be worth $420 billion in the U.S. and $800 billion-plus globally. The valuation assumes that Tesla owns and operates this fleet in perpetuity.
Full self-driving, or FSD, is also given a sizable valuation that’s in the early stages of monetization. BofA thinks this could be worth $480 billion to Tesla.
Despite more catalysts ahead, Murphy’s team issued multiple risk factors that drove the formal rating downgrade:
- low-cost models and another new model later in 2025
- the robotaxi launch in mid-2025
- the Megapack production ramp at Shanghai assembly plant starting in 2025
- updates on full self-driving subscribers
- broader production of Optimus
- risk of new policy being less favorable than expected
Another issue which was brought up in BofA’s report is noting a capital raise, which was considered positive as it would help accelerate growth.
And interestingly enough, Tesla’s core electric vehicle business was valued at at $275 billion. That’s roughly the same market cap of Toyota ($255 billion). It’s also roughly twice as much of the valuation of the combined market caps of GM, Ford and Stellantis.
The valuation for the Optimus robotic operations was given a $36 billion valuation in the U.S. The holdback is that widespread use (households) may not see wide volumes until in the 2040s. And at the same time, BofA opined that Optimus could account for 2% of U.S. manufacturing jobs by 2035 — and 10% of U.S. manufacturing jobs by 2040.
Tesla’s energy generation and storage valuation was put at $80 billion in BofA’s report. Its Megapack is considered the largest driver of growth, with the Powerwall as a smaller but still important contributor.
Tesla’s stock was last seen trading up 0.3% at $412.44. Its 52-week trading range is $138.80 to $488.54.
