A Bullish but Cautious Outlook
In early Tuesday trading, Tesla’s stock took a dip after a top Wall Street analyst issued a bullish note on the electric-vehicle group’s near-term prospects. However, the note also came with a dash of caution tied to the risks it faces in achieving its broader ambitions.
A Year of Muted Trading
Since the November elections, Tesla’s stock has been largely muted. The shares surged more than 60% from the elections to the end of the year on bets that CEO Elon Musk’s close ties with President-elect Donald Trump might result in favorable policies. However, this year has seen a significant slowdown in trading.
Tesla’s Financial Performance
The group posted modestly weaker-than-expected fourth-quarter delivery figures last week. The report also reflected Tesla’s first overall annual-sales decline despite solid gains in China and price cuts in major markets worldwide. Despite the disappointing numbers, Tesla deployed a record 11 gigawatt hours of energy storage over the fourth quarter, a 244% increase from the year-earlier period that took its 2024 total to another all-time high of 31.5 GWh.
A Record-Breaking Quarter
The group’s financial performance was not entirely disappointing. Tesla’s record-breaking energy storage deployment in the fourth quarter is a testament to its growing presence in the market. The company’s ability to deploy such large amounts of energy storage will likely be a key factor in its future growth and expansion.
Tesla’s Earnings Report
Tesla is slated to post its detailed fourth-quarter earnings after the close of trading on January 29. Analysts are looking for a bottom line of $0.72 per share on revenue of $27.23 billion. Gross profit margins are forecast to widen modestly to 18.85%, according to LSEG data.
Bank of America Sees Execution Risk
Investors are likely to focus on the group’s robotaxi rollout, its plans for a low-priced EV that could be launched later in the year, and the ramp of its Optmus robotics platform. However, Bank of America analyst John Murphy argues that Tesla’s post-election rally pegs the stock at a level that "captures much of our base-case long-term potential from core autos, robotaxi, Optimus, and energy generation and storage."
Murphy Downgrades Tesla to Neutral
Murphy downgraded Tesla to neutral from buy in a note published Tuesday, citing execution risks for the group’s broader ambitions. However, he boosted his price target by $90 to $490 a share to allow for last year’s rally.
A Bullish but Cautious Outlook
Since their upgrade in April 2024, news flow and investor sentiment have shifted more positively. Catalysts around future growth drivers have been more fully recognized (most notably for robotaxi). However, Murphy added a caveat to the market’s base case, saying new policy initiatives from the Trump administration may be "less favorable for Tesla than expected."
Robotaxis Key to Tesla Outlook
Murphy listed several catalysts that could support the share price over the next 12 months. These include:
- The likely introduction of a lower-priced EV later this year
- The launch of the group’s new robotaxi service
- The ramp of production at its Shanghai gigafactory
- Updates on Full-Self-Driving technologies that are planned for rollout in major markets in coming months
A Potential Capital Raise
Murphy also sees a potential capital raise as another potential share-price driver. This could help accelerate growth and provide Tesla with the necessary funds to execute its ambitious plans.
Tesla Shares Take a Hit
In premarket trading, Tesla’s shares were marked 1.72% lower to indicate an opening bell price of $404.02 each.
A Warning from a Veteran Fund Manager
In related news, veteran fund manager David Einhorn has issued a dire warning for the S&P 500 in 2025. With interest rates set to rise and the market facing significant headwinds, investors would do well to take note of Einhorn’s warning.
Conclusion
While Tesla’s stock may have taken a hit after the analyst’s note, there are still several reasons to be bullish on the company’s future prospects. The group’s record-breaking energy storage deployment, its plans for a low-priced EV, and its ramp of production at its Shanghai gigafactory all bode well for its future growth and expansion. However, investors would do well to keep a close eye on the group’s execution risks and the potential impact of new policy initiatives from the Trump administration.
Additional Resources
For more information on Tesla’s financial performance, investors may want to check out the following resources:
- Tesla’s fourth-quarter earnings report
- LSEG data on Tesla’s gross profit margins
- Bank of America’s note on Tesla’s stock price target
By staying informed and keeping a close eye on the company’s future prospects, investors can make more informed decisions about their investments in Tesla.
