Tesla's recent strides in robotics and the significant adjustments to its stock price targets have become hot topics among investors. Just recently, Bank of America (BofA) analyst John Murphy increased the price target of Tesla, Inc. (NASDAQ: TSLA) from $350 to $400. This bold move highlights the growing confidence around Tesla's capabilities, particularly concerning its Optimus humanoid robot program. Murphy sees Tesla's advances not only solidifying its position as a leader in electric vehicles but also as a contender with substantial potential within the autonomous robotics sphere.
At the time of the revision, Tesla's stock was trading around $356, gaining 1.8% during the session and showcasing remarkable growth of approximately 44% since the beginning of the year. Many analysts attribute the upward momentum largely to the post-election rally, as Tesla’s CEO Elon Musk has established notable connections with the incoming government, potentially easing business operations for the automaker.
Murphy's insights come after he visited Tesla's Gigafactory located in Austin, Texas, where he met with company officials and participated in test drives of Tesla vehicles. He expressed his increased confidence after witnessing firsthand the technological advancements being pursued by the company. "This trip gave us increased confidence Tesla is well-positioned to grow significantly starting from 2025 and beyond," he remarked, indicating strong optimism about the company's growth trajectories.
One area of focus during his visit was Tesla's famed Full Self-Driving (FSD) technology, which appears to have made significant enhancements. Murphy pointed out during the test drive how smooth the navigation was, particularly through complicated situations like construction zones. It’s noteworthy to mention FSD's impressive performance metrics, with Tesla aiming to achieve less than one human intervention per 10,000 miles, which is on par with competitors like Alphabet Inc.’s Waymo, which currently operates its robot taxis with 17,000 miles between human interventions.
There's more than just vehicle manufacturing at stake for Tesla. The Optimus robot project catches the eye with its promise. While the humanoid robot currently uses only a minute fraction of Tesla's computing power, expectations are high for its potential contributions as production ramps up. Murphy believes deploying around 1,000 Optimus robots by the end of 2025 could accelerate capabilities and improve efficiencies substantially. “We expect the resources available for Optimus will grow, which will drive increased production by 2026+,” he added, hinting at the vast possibilities this technology might open up for the company.
Interestingly, Murphy isn’t alone in his optimism. Both Deutsche Bank and Citigroup are projecting the humanoid robot market could balloon to $7 trillion by 2050, driven by advancements across various sectors including logistics and home services. This staggering figure reflects the potential demand for robotics technologies, and Tesla appears poised to capture this market if it can successfully launch Optimus.
Despite the excitement, not every analyst shares the same level of enthusiasm about the future of Tesla's technologically driven initiatives. Joseph Spak from UBS has voiced skepticism about the overall contribution of Tesla's burgeoning AI capabilities. He believes the optimism around its AI initiatives is something of inflated expectations relative to the company’s actual output, particularly questioning the hyper-focus on robots and self-driving technology. Spak recently increased Tesla's price target to $226 from $197 but simultaneously maintained his ‘Sell’ rating based on perceived speculative elements around the stock.
On the other hand, Dan Ives from Wedbush has labeled Tesla as the most undervalued AI play on the market, underlining the potential value of Tesla’s full self-driving technology which he estimates could be worth up to $1 trillion. "We believe Tesla's stock price could double to around $600 over the next 18 months," he predicted, citing strong backing for Tesla's self-driving technology overshadowing potential doubts.
According to Murphy, as well as other optimistic market analysts, technological advancements are set to be pivotal as Tesla ramps up production of new vehicles, including plans for lower-cost EVs targeted at the sub-$30,000 bracket. This rollout is positioned for the first half of 2025 and aims to expand Tesla’s addressable market significantly. Cost-effective strategies are anticipated to include using smaller battery packs and innovative manufacturing practices.
Despite contrarian viewpoints, market reactions to the news have driven Tesla shares upward significantly. Following the news of the increased price target from BofA and positive reports stemming from the Gigafactory visit, Tesla shares surged by 3.8% recently, putting them at their highest level since early 2022. This uptick propels Tesla’s year-to-date gains to over 50% and appears to suggest sustained investor confidence.
What does the broader future hold for Tesla? Factors like their readiness to launch robotaxi services with their FSD technology, the optimistic outlook for the Optimus project, and the potential launch of lower-cost EVs all culminate to form a picture of aggressive expansion amid increased scrutiny and skepticism from parts of Wall Street. The juxtaposition of such sentiments presents investors with opportunities as much as it raises questions. Whether Tesla can maintain this growth without overextending itself, especially with its ambitious robotics program, remains to be seen. All eyes will undoubtedly be on the developments Tesla has planned through 2025 and beyond.
Given the immense potential for growth in EVs and robotics, which could redefine industries, Tesla is pursuing not just the car market but aiming at shaping the future of automation. Murphy’s report and the wider discussions within the financial landscapes show how intertwined technology and investment opportunities have become. Keeping pace with these developments will be key as Tesla aims higher than ever.