As investors focus on long-term catalysts like FSD, robotaxis, and Optimus, Tesla’s stock has seen significant growth in 2024. Despite short-term concerns, such as a potential fourth-quarter delivery miss, the company’s future prospects remain a topic of interest.
The Analyst’s Take
Bank of America analyst John Murphy has downgraded Tesla from Buy to Neutral, raising the price target from $400 to $490. According to Murphy, Tesla has long-term catalysts, but the rise in stock price in 2024 may put valuation into question. The execution risk is high, and while there is still upside to Tesla stock, the recent price increase limits the long-term potential.
Key Takeaways
- Tesla’s robotaxi segment is considered the biggest opportunity, potentially accounting for nearly 50% of the company’s valuation and worth $420 billion in the US and over $800 billion globally.
- The robotaxi launch in 2025 could be the start of something significant for Tesla, offering rides at a lower price to consumers while maintaining higher margins.
- FSD valuation is also sizable, with higher margins than Tesla’s core auto business, potentially generating billions in EBIT annually.
- The adoption rate for FSD is increasing and expected to continue with new updates.
Sum-of-the-Parts Valuation
Murphy’s valuation for Tesla segments is as follows:
- Auto: $180 billion to $415 billion, with a mid-point of $275 billion (16% of valuation)
- Robotaxis (US): $296 billion to $798 billion, with a mid-point of $421 billion (24.5% of valuation)
- Robotaxis (International): $296 billion to $798 billion, with a mid-point of $421 billion (24.5% of valuation)
- FSD (US): $176 billion to $432 billion, with a mid-point of $240 billion (14% of valuation)
- FSD (International): $176 billion to $432 billion, with a mid-point of $240 billion (14% of valuation)
- Optimus: $14 billion to $95 billion, with a mid-point of $36 billion (2% of valuation)
- Energy: $68 billion to $101 billion, with a mid-point of $82 billion (5% of valuation)
- Total: $1,206 billion to $3,071 billion, with a mid-point of $1,714 billion
Risks and Challenges
Execution risks include introducing new models, launching robotaxis, and starting production of Optimus. Delays to this timeline could impact the share price. Additionally, there is a risk of new policies under the new administration being less favorable to Tesla than expected.
Conclusion
Tesla’s future prospects depend on the successful execution of its plans, including the launch of robotaxis and the growth of FSD. While there are risks and challenges ahead, the company’s long-term catalysts and potential for growth make it an interesting investment opportunity. With a sum-of-the-parts valuation of $1.7 trillion, Tesla’s stock price could reach $490 per share, offering significant upside potential for investors.