Analyst revisits Tesla stock price target amid 'balancing act'

Tesla shares moved higher in early Thursday trading, but remained mired in a weeks-long slump, as a top Wall Street analysts suggests the recent bearish moves belie what is still a compelling near-term story for the world's biggest EV maker. 

Tesla  (TSLA)  shares have remained firmly in the red this year, falling more than 11.3% since early January and nearly 30% since their all-time peak in mid December as investors grew less patient with CEO Elon Musk's expanding role in the Trump administration and the carmaker posted its first-ever annual sales decline. 

The group's fourth quarter earnings also rang alarm bells for investors as profit margins narrowed amid slumping EV demand and a global price war, while sales missed forecasts and Tesla failed to provide robust delivery guidance into the coming year. 

Musk, however, was characteristically upbeat in his conference call with investors and reiterated plans to launch a low-cost EV later this year and to put the first fully autonomous Tesla cars on the road by this spring.

"Very few people understand the value of self-driving and our ability to monetize the fleet," Musk said. "Some of these things I've said for quite a long time, and I know people have said, 'Well, Elon, the boy who cried wolf several times.' But I'm telling you, there's a damn wolf this time and you can drive it."

Tesla also said it expected its auto business to return to growth, although Musk did not repeat his earlier estimates of a 20% to 25% gain in deliveries.

Since then, however, delivery data from China, Germany and the United States indicates at least some brand erosion from Musk's increasingly political stance, while his recent attempt to purchase ChatGPT creator OpenAI for $97.4 billion has added an extra layer of complexity, and possible distraction, onto his hefty plate of responsibilities. 

Court filings from late Wednesday did indicate that Musk would drop his bid if OpenAI if it were to halt its planned conversion to a for-profit entity, but many analysts suggest this is a tactic designed to complicate its ongoing effort to raise capital from foreign investors. 

Musk's 'balancing act'

Wedbush analyst Dan Ives, however, argues in a note published late Wednesday that Musk's close ties with the Trump administration, and the changing regulatory landscape, will "lay the groundwork for a federal autonomous roadmap which we believe unlocks a $1 trillion of valuation alone for Tesla over the coming years".

Ives, who reiterated his 'outperform' rating and $550 price target, said Tesla's near-term rollouts, including unsupervised self-driving tests, the launch of a low-cost model and its growing scale in robotics more than offset Musk's recent focus on his DOGE and AI takeover efforts.

Related: Analyst resets Tesla stock forecast as Musk targets OpenAI

"Musk has always been able to balance his countless initiatives better than any other CEO we have seen and the innovation and tech machine at Tesla is actually accelerating into an autonomous and robotics future despite growing skepticism around Musk's DOGE balancing act," Ives said. 

The analyst did note, however, that the prospect of a tit-for-tat trade war between Washington and Beijing could add a new degree of uncertainty for the beaten-down stock, particularly given its weakening position in the world's biggest EV market.

China weakness

Tesla's China sales fell to 63,2389 units last month, an 11.5% slide compared to last year, while domestic rival BYD saw a rise of 47.5% to 296,446 units. 

"While there are silver linings around some elevated China tariffs, for Tesla the worry is that Beijing retaliatory policies would then set off a trade war and create geopolitical headwinds for Tesla within this key China market," Ives said. 

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"To this point, China is a key market for Tesla and we anticipate some carve outs for both Tesla and Apple on the China tariff front and also expect Musk to have a very big role (expanding by the day) in a Trump White House and be heavily involved in the China tariff discussions in 2025," he added. 

Tesla shares were last marked 2.45% higher in premarket trading to indicate an opening bell price of $344.79 each.

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