Bank of America Increases Tesla Price Target to $400

Investing.com — Bank of America raised its price objective for Tesla (NASDAQ: TSLA) shares to $400 from $350 on Thursday, citing enhanced growth confidence after a visit to Tesla's Giga Texas factory in Austin.

The bank's visit included meetings with investor relations, factory tours, and test drives.

The analysts stated that this trip provided increased confidence that Tesla (TSLA) is well-positioned for growth starting in 2025 with its core EV business, which will expand its Total Addressable Market (TAM). The anticipated launch of its robotaxi offering and longer-term investments in Optimus also play a crucial role in their projections.

BofA mentioned that Tesla showcased substantial improvements in its Full Self-Driving (FSD) capabilities, with versions 12.5 and 13.2 navigating challenging roads autonomously. The company anticipates interventions of once every 10,000 miles in the near future, which is critical for its expected 2025 robotaxi launch.

In comparison to Waymo's milestones, Tesla's rapid expansion of AI compute through 50,000 H100 chips significantly strengthens its position.

Additionally, the Optimus robot program is advancing, with current tasks including sorting 4680 battery cells. Tesla aims to scale production to 1,000 units by 2025.

Enhanced training and increased compute resources are expected to accelerate the development of Optimus and could potentially lower production costs significantly by 2026.

BofA anticipates that Tesla's margin growth will shift from being hardware-focused to software-driven, leveraging premium services like FSD and connectivity.

They also noted that Tesla's AI and robotics initiatives could justify an equity raise to further expand compute capacity, which they believe would be welcomed by investors.

In summary, BofA considers Tesla well-positioned for long-term growth and expresses optimism with an elevated valuation based on strong EV/EBITDA projections.