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Investment bank Piper Sandler has hiked its Tesla share price target by a whopping 59% to $500 in a fresh note released earlier today. In its note, the bank warns that Tesla might face some headwinds during the first half of this year but insists that the firm is still its top Buy and Hold idea. Tesla's shares enter 2025 after a mixed bag of performance in 2024. Last year, the downturn in the electric vehicle industry stemming from high rates and inflation translated into poor performance for Tesla's shares up until the November election. After the election, the shares appreciated by close to a hundred percent over the next few months.
Tesla Shares Up 2% In Pre-Market Following Piper Sandler's Bullishness
As part of its latest analyst note, which increases Tesla's share price target to $500 from $315 and rates the stock as its top 'Buy and Hold' idea, Piper Sandler mentions that it has consolidated more than a dozen Tesla data sets to arrive at its conclusion. While Tesla's shares struggled in 2024 due to a sluggish EV market, Piper Sandler outlines that artificial intelligence is now baked into the firm's hypothesis.
The bank believes that investors are now "starting to appreciate Tesla's potential in 'real-world' A.I., which leads them to consider a greater upside for the stock. Tesla's assisted driving platform, called full self driving, is at the core of its valuation due to the vast amounts of data and computing resources at the firm's disposal.
Investors' interest in services like autonomous ridesharing platforms, colloquially dubbed 'robotaxis' has also played a role in Tesla's valuation, particularly as the shares dipped after the firm's autonomy day last year, which failed to provide a concrete outlook for its ridesharing plans.
However, despite the fact that Piper Sandler is appreciative of Tesla's AI exposure, the bank does warn that "long-term narrative often takes a back seat" when a firm does not deliver on its immediate financial estimates. Tesla's stock dipped by 6% on the first trading day of the year after its 2024 vehicle deliveries of 1.79 million marked a 1.1% drop over 2023's figures. The firm had delivered 495,930 vehicles, which fell short of analysts' estimates of 510,000 vehicles.
For Piper Sandler, for the near term estimates, its Tesla outlook is "highly uncertain." While Wall Street frets over Tesla's cars, CEO Elon Musk has repeatedly asserted that the firm's Optimus line of humanoid robots will be the biggest valuation driver in the future. To Piper, "it's clear that Tesla's thesis will ultimately depend on new-age opportunities like Optimus robots and neural-net-training-as-aservice."
The bank notes that as these services and products do not currently generate revenue and their markets aren't clear, the "nebulous revenue streams are difficult to incorporate into a DCF." This difficulty has forced the bank to shift to a P/E valuation methodology for Tesla.
Piper's $500 Tesla share price target is based on a 120x fiscal year 2026 earnings per share, and it adds that investors will have greater clarity a year from now. As the bank notes:
Our $500 price target is based on 120x FY26E EPS, which is in the top-half of TSLA's historical trading range. By one year from now, investors should have greater clarity re: new product cadence; this should allow them to focus on other, more exciting topics (e.g. rising FSD efficacy and the implications for Tesla's A.I. ambitions).
About the author: Ramish is a seasoned technology writer and editor with more than a decade of experience. He specializes in semiconductor fabrication and market analysis. With a background in finance and supply chain management - via his bachelors in Finance and a micromasters in supply chain management from MIT - Ramish combines financial rigor with deep industry insight to deliver accurate and authoritative coverage.
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