Tesla’s Stock a “Must Own”? One Analyst Bets on AI Disruption

Tesla's stock is under scrutiny as analysts weigh the company's potential against regulatory challenges and competitive pressures. While one analyst has called TSLA a ‘must own', driven by artificial intelligence (AI) and autonomous vehicle technology, others remain cautious.

The electric vehicle (EV) maker is currently trading around $435.90, up 5.42% to kick start the week, although this morning's pre-market action has the stock 2.2% lower.

Melius Research initiated coverage with a “Buy” rating and a $520 price target, suggesting substantial upside. The firm's conviction stems from Tesla's potential to capitalize on AI's disruptive force in the automotive industry, particularly through autonomous driving.

However, the firm acknowledges that valuing such a company is inherently speculative.

Countering this bullish sentiment, UBS maintained a “Strong Sell” rating, raising its price target to $247 from $215. Other analysts offer varied perspectives, with Canaccord Genuity reiterating a “Strong Buy” rating with a $490 target, while Cantor Fitzgerald reaffirmed a “Buy” rating with a $355 target. Morgan Stanley holds a “Buy” rating with a $410 price target. This divergence highlights the divided sentiment surrounding Tesla's future performance.

New Models and Competitive Pressures

Tesla recently introduced more affordable versions of its Model Y and Model 3, priced at $39,990 and $36,990, respectively. These models feature reduced premium components and battery sizes, aiming to attract new buyers.

However, the relatively small price difference from premium trims has raised concerns about their ability to generate significant demand, especially following the loss of U.S. tax credits. The question remains as to whether these versions can effectively address escalating competition from lower-cost Chinese and European EVs.

The contrasting analyst opinions, coupled with regulatory scrutiny and competitive pressures, contribute to the ongoing debate surrounding Tesla's valuation and future prospects, leaving markets carefully assessing whether the company can truly deliver on its ambitious vision. Whilst some on Wall St may consider Tesla a must buy, the consensus is far more nuanced than that, and there is no such thing as a sure thing.