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Tesla's Latest Price-Target Hike is Still Pretty Bearish
Last week, following its Q3 results, Tesla (TSLA) experienced its sharpest single-day rally in over 10 years. Today, TSLA stock is priced at $257.55, less than 6% from its 52-week high. The recent strength in Tesla's share price has propelled the electric vehicle (EV) stock to a gain of 30.4% in the past year and 3.5% in 2024.
With a market cap of $826 billion, Tesla is the largest automobile company in the world, but still trades 37.8% below all-time highs. In this article, we'll look at what analysts expect from the EV giant going forward, and whether you should invest in Tesla at the current multiple.
What's the Target Price for Tesla Stock?
Brokerage firm Barclays just raised Tesla's target price to $235 from $220, while maintaining an “equal weight” rating on the stock. Barclays stated that Tesla’s improving gross margins and a strong shipment forecast for 2025 make it a top investment right now. Tesla reported a gross margin of 19.8% in Q3 of 2024, up from 17.9% in the year-ago period. Moreover, Tesla expects vehicle shipments to rise between 20% and 25% next year due to the introduction of lower-priced vehicles, which is above estimates for a 15% growth.
While Barclays is bullish on Tesla, its upwardly revised target price is almost 9% lower than the current trading price.
On the more optimistic side, Piper Sandler maintained a “buy” rating for Tesla stock, and increased its target price to $315 from $310 to reflect higher deliveries and margins.
Out of the 38 analysts tracking TSLA stock, the most popular rating is still a “hold.” In total, 10 recommend “strong buy,” two recommend “moderate buy,” 17 recommend “hold,” one recommends “moderate sell,” and eight recommend “strong sell.”
Plus, the average target price for Tesla stock is $215.65, over 16% below the current trading price.
Is Tesla Stock a Good Buy Right Now?
Tesla soared 21.9% on Oct. 24 after it reported revenue of $25.37 billion and adjusted earnings per share of $0.72, which topped Wall Street's forecast for adjusted EPS of $0.58 in the September quarter.
The company’s bottom line was boosted as it earned $739 million from environmental regulatory credits. Notably, Tesla also reported $326 million in revenue from its full self-driving (FSD) operating system.
During the Q3 earnings call, CEO Elon Musk said that Tesla would start production of the Cybercab, a robotaxi, by the end of 2026. Further, Musk predicted that Tesla would begin driverless ride-hailing of existing cars in markets such as Texas and California.
Investors should note that Musk has repeatedly missed his deadlines for launching several products in the market, including a fully autonomous vehicle, which he has promised for almost a decade.
While Tesla expects the robotaxi to diversify its revenue stream and bring in billions of dollars each year at scale, it still needs to successfully deliver a future-ready vehicle and meet regulatory requirements. Moreover, it needs to wrestle with competition from companies such as Waymo parent Alphabet(GOOGL)(GOOG), Uber (UBER), and General Motors (GM), all of which are investing in autonomous driving.
The Final Takeaway on TSLA Stock
Analysts tracking Tesla stock expect adjusted earnings to expand from $2.47 per share in 2024 to $3.26 per share in 2025. Given its volatile profit margins and free cash flow, TSLA stock is quite expensive, priced at 79x forward earnings.
Tesla’s focus on cost-cutting has helped it almost triple its free cash flow to $2.74 billion in Q3 of 2024, up from $849 million in the year-ago period. Given an annual free cash flow run rate of $11 billion, TSLA stock remains richly valued amid a challenging macro environment.
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On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
