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Tesla’s inventory (TSLA -4. 02%) was down 21% in the first part of 2024 amid falling auto revenue. But the stock is up 17% since its first-quarter earnings report was released, and Wall Street analysts are starting to anticipate a possible improvement in demands in the near term.
Stifel initiated the policy on the stock with a Buy rating and a price target of $265, representing a 35% upside over the existing stock value of $195. 55. The company bases its price target on the expectation that the updated Model 3 and Model Y will see strong demand and return the company to growth.
As the festival in the electric car market intensifies, Tesla is racing to lower the prices of its cars to achieve healthy demand. Increasing mass adoption of its cars is a long-term purpose of the company, however, the recent increase in interest rates has made it a more pressing need to increase the profits of the automotive sector. After reporting a 15% increase in automotive sector earnings in 2023, Tesla reported a 13% year-over-year decline in the first quarter.
Tesla’s goal this year is to move to its next-generation production system, which is helping to reduce its vehicle deliveries. However, the new system aims to speed up production to make more cars at higher consumer value.
Stifel expects Tesla to return to physically powerful expansion in 2025 and beyond. But the company also expects a growing cash contribution from Tesla’s self-driving vehicle AI software, which would increase Tesla’s cash inflow and profit margin, and in particular increase the company’s price.
History says that the most productive time to bet on Tesla is when expectations are low. Opportunities in AI software and other new products may not be fully reflected in the stock’s valuation.
Tesla stock hit a high of $414 at the end of 2021, so a move toward the analyst’s price target is possible. The stock is expected to rise if the company begins to see higher profits after the transition to the next generation production system.
John Ballard holds positions at Tesla. The Motley Fool holds positions at Tesla and recommends him. The Motley Fool has a disclosure policy.
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