Tesla (TSLA 3.64%) stock has been on an upward tear in recent weeks. Its share price has doubled since the company reported earnings on Oct. 23, and it has advanced more than 70% since the U.S. presidential election on Nov. 5. Factors contributing to that upside include encouraging updates during the recent earnings call and CEO Elon Musk’s close relationship with President-elect Donald Trump.
Importantly, Tesla’s stock recently did something it hasn’t done in more than three years: It reached a new all-time high on Dec. 11, 2024 for the first time since November 4, 2021. But Wall Street says the stock is due for a correction. The median 12-month price target of $275 implies 37% downside from the current share price of $436. The median is the middle value. So, half of the 57 analysts who follow Tesla currently think shares will plunge more than 37% in the next year.
Here’s what investors should know about the electric carmaker turned artificial intelligence (AI) company.
Tesla reported encouraging financial results in the third quarter
After a series of disappointing financial reports, Tesla may have reached a turning point in the third quarter. Revenue rose 8% to $25 billion, gross margin expanded 195 basis points to its highest level since 2022, and non-GAAP net income jumped 9% to $0.72 per diluted share. Additionally, CEO Elon Musk said deliveries could increase 20% to 30% next year.
In particular, margin expansion bodes well for Tesla. The company cut prices several times in recent years to compensate for weak demand caused by high interest rates. Those price cuts hurt profitability. In fact, Tesla’s earnings declined in the first and second quarters this year, and the company missed earnings estimates in the four quarters preceding the most recent one. But Tesla may finally be on the upswing now that interest rates are falling.
Indeed, while the company has seen its market share decline by three percentage points in 2024, Tesla still accounted for an industry-leading 17% of battery electric vehicle (EV) sales through October. And that figure could increase next year when it adds a more affordable model in the first half of 2025. But its largest opportunities lie in AI and robotics.
Tesla has big opportunities in autonomous driving technology and robotics
Elon Musk has frequently said fully autonomous vehicles were right around the corner and has consistently come up short on those predictions. However, most analysts have no doubt that self-driving cars are the future of the transportation and mobility industries, and Tesla is ideally positioned to disrupt both in the years ahead.
Touting 1,000-fold improvements in critical interventions in its full self-driving (FSD) software this year, Tesla will release an unsupervised version of FSD and launch a ride-hailing service in California and Texas in 2025 that will have major implications for the business. Grand View Research estimates autonomous vehicle sales will reach $214 billion by 2030, and Musk believes FSD can push Tesla’s gross margin to 70%.
Beyond autonomous driving technology, Musk believes the humanoid robot Optimus will eventually be Tesla’s most valuable product. He said on the third-quarter earnings call, “I feel confident in saying that we have the most advanced humanoid robot by a long shot.” Citigroup analysts estimate humanoid robot sales will reach $209 billion by 2035, $1 trillion by 2040, and $7 trillion by 2050.
