Elon Musk and Tesla (TSLA:NASDAQ) optimists in the analyst community appear to be pinning hopes on AI, robotaxis and robotics to reverse the negative mood surrounding the stock in recent months.
Since peaking at an all-time high close to $480 in mid-December 2024, shares in the electric car firm have lost more than 40% of their value, a plunge that has wiped more than half a trillion dollars off the firm’s market cap.
Declining demand, rising costs and Elon Musk’s controversies continue to drag on investor sentiment, with the 45% year-on-year slump in January European vehicle sales a real bombshell.
Worryingly for shareholders, falling demand was not restricted to Europe, with sharp mid-teens January declines in the US and China, its two most crucial markets, even in the face of ticket price cuts designed to attract buyers.
Lower sales have directly impacted Tesla’s revenue and profitability, leading analysts to downgrade their Tesla stock forecasts. This followed lacklustre fourth quarter earnings which missed expectations and left investors in dour mood.
At the start of the week, Tesla investors were handed a welcome lift as the stock was reinstated as a top pick by Morgan Stanley. Analyst Adam Jonas cited advancements in AI and robotics as key drivers for future growth, despite challenges in the core automotive business. Jonas reaffirmed a $430 price target, representing more than 50% upside from recent $285 trading levels.
According to Jonas, a long-time Tesla bull, falling vehicle sales are part of the firm’s transition from a traditional automotive ‘pure play’ to a highly diversified technology provider.
‘While the journey may be volatile and nonlinear, we believe 2025 will be a year where investors will continue to appreciate and value these existing and nascent industries of embodied AI where we believe Tesla has established a material competitive advantage,’ Jonas wrote in a note.
Catalysts for the stock this year could include the scheduled June 2025 robotaxi service launch in Austin, a potential AI day, launches of lower-priced models in the second or third quarter as well as a ‘potential’ third-generation Optimus humanoid robot unveil.
Elon Musk has previously said he believes Optimus could be a $10 trillion dollar market opportunity, although sceptics will note Musk has a habit of making bold predictions that fail to materialise.
Tesla bull Cathie Wood, who runs tech-focused Ark Investment Management in the US, also threw her support behind the company and its stock, saying there is a lot of ‘pent-up demand’ for Tesla vehicles. The big valuation unlock, in her view, is Tesla releasing robotaxis across the country, although there remain regulatory hurdles to overcome first.
