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Tesla (TSLA) recently rejoined the trillion-dollar club following an impressive rally in 2024 and Donald Trump’s successful bid for a second term in the White House. Shares of the electric vehicle giant have surged over 70% year-to-date, easily crushing broader market returns and pushing CEO Elon Musk’s net worth over $400 billion.
Valued at a market cap of $1.4 trillion, Tesla is the world’s largest automobile company. Wedbush Securities analyst Dan Ives remains bullish and thinks that Tesla has even more room to run. With this in mind, he has raised his price target on TSLA stock. Let’s see why.
Wedbush Securities Expect Tesla Stock to Surge to $650
According to a report from Seeking Alpha, Ives raised the base price target for Tesla from $515 to $650, above the current trading price of $440. Ives believes Tesla’s artificial intelligence and autonomous driving initiatives could benefit under a Trump administration in 2025 due to lower regulatory hurdles in the autonomous and full-self-driving verticals.
Moreover, Ives estimates Tesla’s AI and autonomous capabilities represent a $1 trillion opportunity. Wedbush now projects Tesla reaching a $2 trillion market capitalization by the end of 2025, supported by stabilizing demand in China and progress in autonomous technology. The analyst also expects accelerated development of the Cybercab program to help justify Tesla's premium valuation in the coming year.
Tesla reported substantial improvements in FSD capability in the third quarter of 2024 on the autonomous driving front, expecting to achieve better-than-human intervention rates within the next nine months. Further, it plans to launch public ride-hailing services in Texas and California (pending regulatory approval) next year.
Interestingly, Wedbush's price targets don't factor in any value for Tesla's Optimus humanoid robot project, which Ives views as a potentially significant growth driver in the upcoming decade.
Tesla Is an EV Giant
Tesla has increased its sales from $3.2 billion in 2014 to $96.8 billion in 2023 as it enjoyed a first-mover advantage in the electric vehicle sector. However, rising competition from China, elevated inflation and interest rates, and a sluggish macroeconomy have weighed heavily on top-line growth in the last three years.
Over the past 12 months, Tesla’s revenue has grown by just 1.3% year over year to $97.2 billion. Moreover, its gross margins have narrowed to 18.2% in 2024 from 25.6% in 2021.
While Tesla’s automotive sales are slowing, its energy generation and storage segment sales grew over 60% year-over-year to $2.4 billion in Q3. The energy business operates through three main product categories and might be a key driver of future earnings.
Tesla’s energy storage line is designed to store energy from solar or grid sources, while the solar energy division offers solar panels and roof tiles. These products serve diverse customers, including homeowners, businesses, utilities, grid operators, developers, and government entities. While this business continues to expand, it remains a small portion of Tesla’s total sales.
Tesla marked several milestones in Q3, including producing its 7-millionth vehicle. CEO Elon Musk projected 20%-30% vehicle growth for 2025, while announcing plans for more affordable models in the first half of next year and volume production of the Cybercab in 2026, targeting 2 million to 4 million units annually.
Tesla generated record operating cash flows of $6.3 billion, with automotive revenues growing quarter-over-quarter and year-over-year despite lower average selling prices due to financing incentives. Energy margins hit a record of over 30% in Q3, while automotive margins may face challenges in the current quarter due to underlying economic conditions.
What Is the Target Price for TSLA Stock?
Tesla’s capital expenditure is expected to exceed $11 billion for the year, with significant investments in AI computing infrastructure, driving future cash flow and higher earnings.
However, the ongoing rally has meant TSLA stock trades at a premium valuation. Analysts expect the company’s adjusted earnings to expand from $2.48 per share in 2024 to $4.20 per share in 2026. So, priced at 105x forward earnings, TSLA stock is expensive.
Out of the 38 analysts covering Tesla stock, 12 recommend “Strong Buy,” two recommend “Moderate Buy,” 15 recommend “Hold” and nine recommend “Strong Sell.” The average target price for TSLA stock is $280.47, indicating a downside potential of 36% from current levels.
