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Tesla shares struggled in the first half of 2024, but Wall Street expects a turnaround.
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Second-quarter deliveries fell, but were not as bad as analysts had expected.
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Now all eyes are on the Robotaxi and AI initiatives as the next phase of growth begins.
After a rocky period for Tesla shares and much drama surrounding Elon Musk’s legal battle, the electric car maker may finally be ready for a comeback, according to a chorus of Wall Street analysts.
Investors have been eyeing a potential rebound in the stock for more than a year, as Tesla sales have fallen 15% over the past 12 months. Tesla deliveries fell for the second straight quarter, but they were stronger than analysts had expected, at 443,956 compared to estimates of 436,000.
The numbers could be a sign of better times ahead for the automaker, especially as Musk ends the soap opera surrounding his pay package and investors keep their eyes peeled for developments in artificial intelligence.
“Tesla is getting its mojo back?” Morgan Stanley strategists said in a note Tuesday. “Less than 2 weeks ago, our clients were bracing for shareholders to reject Elon Musk’s 2018 compensation package, potentially signaling a change in management and strategy that would compound months of negative news. Now, clients are starting to ask us about positive catalysts for Q2 results and beyond.”
Tesla also reduced its inventory in the second quarter and raised its energy storage to a record high. The strategists said the higher energy storage was a “show stealer” update because it suggests Tesla could benefit from increased energy demand due to the AI boom.
“As the acceleration of Gen AI drives multigenerational growth in energy demand, electricity generation, and data center investment, we believe investors will pay increased attention to Tesla Energy. We value the company at $36 per Tesla share ($130 billion) as the company is uniquely positioned to benefit from investments in the U.S. electric grid that are being accelerated by the AI boom,” the researchers said.
Morgan Stanley reiterated its “overweight” rating on Tesla shares with a price target of $310, implying a further upside of 30%.
“The stock remains bullish following its annual shareholder meeting in mid-June,” said Garrett Nelson, senior equity strategist at CFRA Research. “We believe Musk has successfully shifted investors’ focus to long-term opportunities in AI, robotics, energy storage and other industries, and in doing so, has distracted from near-term challenges.”
Nelson added that Wall Street is focused on Tesla’s Robotaxi, the fully self-driving service that Musk has been talking about for months and which he said could be a “huge driver” of future growth.
CFRA maintained a buy rating on the stock and raised its price target to $250 per share, implying an upside potential of just 1%.
Other strategists were even more optimistic after the better-than-expected delivery figures.
“I think the stock is going to double or triple over the next few years, maybe even more. And again, we’re still in the early stages,” Keith Fitz-Gerald, managing director of Keith Fitz-Gerald Research, told CNBC on Tuesday, adding: “This is about power. This is about robotics. I think this is perhaps the best undervalued AI player on the planet right now. And like him or not, Musk knows what he’s doing.”
Wedbush Securities analyst Dan Ives previously said Tesla could see a strong rally in the second half of the year as the introduction of the Robotaxi represents a turning point for the company.
Wedbush reiterated its “outperform” rating on Tesla and raised its price target to $300 per share. Ives said that under the most optimistic scenario, Tesla shares could hit $400 by the end of the year, implying a 63% upside from current levels.
“The key for Tesla stock is that Wall Street recognizes that we believe Tesla is the most undervalued AI player in the market,” Ives said in a note. He later added: “In short, the worst is over for Tesla as we believe electric vehicle demand is rebounding with the disruptive technology ahead of historic Robotaxi Day on August 8.”
Tesla shares rose as much as 10% on Tuesday after it reported deliveries, and they were up 6% on Wednesday to around $246. The stock has reversed nearly all of the losses it saw in 2024, with shares down less than 2% year to date.
Read the original article on Business Insider
