The technological advances that have occurred over the past few decades have had a dramatic impact on the world we live in. There have also been significant changes in the stock market, and the evidence is undeniable.
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To be clear, this trillion-dollar club is still quite elite, with (as of this writing) only eight U.S. companies joining the slot. These include Nvidia, Apple, Microsoft, Amazon, Alphabet, Meta Platforms, and Taiwan Semiconductor Manufacturing. But this exclusive fraternity has just added a new member.
But some on Wall Street believe the electric vehicle (EV) maker is just getting started. Let’s take a look at recent challenges, what could drive Tesla stock even higher in the coming years, and why Wall Street remains bullish.
To be clear, some investors have clearly become bearish on Tesla over the past few years, and that sentiment is understandable. The biggest headwind was the economic downturn and the accompanying high inflation in decades. The Federal Reserve took the appropriate action of raising interest rates to control the spike in inflation. As a result, borrowing costs rise, which over time tends to curb price overheating and lower inflation.
This was a double blow for Tesla. In difficult economic times, consumers tend to postpone major purchases, such as buying a car. What’s more, even the cheapest Tesla EVs are more expensive on average than gas-powered cars. As a result, some consumers have postponed buying a car altogether, while others have moved on to lower-priced options.
Next is the issue of funding. Eventually, interest rates rose to a 23-year high, discouraging borrowers from getting car loans and putting Tesla models out of reach for many. But after years of uncertainty, the automaker appears to have finally turned a corner.
Tesla’s total revenue for the third quarter was $25 billion, up 8% year-over-year, and operating income increased 54%. The company’s efforts to reduce production costs are bearing fruit, further reducing its bottom line. Add to this the economic recovery and the Fed’s decision to start cutting interest rates, and all the ingredients are in place for Tesla’s long-awaited recovery.
Tesla has been on a remarkable rise over the past few weeks, with the stock up 32% in the past month (as of this writing). Despite its spectacular performance, some on Wall Street remain surprisingly bullish.
Leading the pack is Bank of America analyst John Murphy, who maintained a buy rating on the stock and just raised his price target to a high of $350 per share. This represents a potential upside of 18% for investors compared to Wednesday’s closing price.
The analyst believes the company will benefit from policy changes under the Trump administration. These could include a review of regulations around Tesla’s fully self-driving (FSD) capabilities and the imposition of tariffs on imported goods, which President-elect Trump promised during his campaign.
Wedbush analyst Dan Ives echoed some of the same points, giving Tesla an outperform rating and a $300 price target. “Tesla remains the biggest winner of the Trump administration,” Ives wrote. The analyst suggested that Trump could accelerate some FSD and self-driving efforts for Tesla starting in 2025.
Ives previously noted that although EV rebates and tax incentives may end, it could ultimately be a positive development for Tesla. “Tesla has unparalleled scale and reach in the EV industry, and this dynamic…gives Tesla a clear competitive advantage in a non-EV subsidy environment,” the analyst said. . Ives also suggested that tariffs on imports from China could make these cheaper EVs less competitive.
It’s also worth noting the vast possibilities that exist with the upcoming launch of Tesla’s CyberCab robotaxi. This vehicle is still in development, but it has the potential to change the industry as we know it. At a recent product event introducing the prototype, CEO Elon Musk said streamlined design and manufacturing improvements paved the way for large-scale, cost-effective manufacturing of the CyberCab. The company believes robotaxis could be produced “before 2027.”
If Musk’s plan comes to fruition, that’s a big assumption, but it could be a game-changer for Tesla. Ark Invest’s Cathie Wood has a $2,600 price target for Tesla stock, which depends on the launch and ultimate success of the CyberCab. This represents a potential upside of 775% for investors, but some see that potential as a distant prospect.
I would be remiss if I did not mention that issue regarding stock valuation. Investor concerns about Tesla’s price are understandable, with Tesla trading at about 119 times forward earnings and 8 times forward sales, thanks to its post-election rally.
If you already own Tesla stock, bravo! Hold those stocks. For those who haven’t, Tesla has proven time and time again how volatile its stock can be, allowing smart investors to own the stock at a much more reasonable valuation. Back in April, investors could have picked up the stock for half the current price.
To justify the current valuation, shareholders believe Tesla will continue to sell EVs, continue to reduce production costs, leverage its foray into artificial intelligence, and ultimately deliver on the promise of robotaxis. There is a need. That’s clearly a tall order, but if that happens, today’s valuations could look cheap by comparison.
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John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Alphabet executive Suzanne Frye is a member of The Motley Fool’s board of directors. Bank of America is an advertising partner of Motley Fool Money. Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool’s board of directors. Danny Vena has held positions at Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Bank of America, Meta Platforms, Microsoft, Nvidia, Taiwan Semiconductor Manufacturing, and Tesla. The Motley Fool recommends the following options: A long January 2026 $395 call on Microsoft and a short January 2026 $405 call on Microsoft. The Motley Fool has a disclosure policy.
Here are the latest hyper-growth stocks to join the trillion-dollar club alongside Nvidia, Apple, Microsoft, Amazon, Alphabet, Meta, and Taiwan Semiconductor. Some Wall Street analysts say there’s still room to buy at this point. Originally published by The Motley Fool
