As Tesla (TSLA, Financials) shows great potential for development through 2025, Bank of America (BAC, Financials) Securities has changed its price target for the firm to $400 from $350. The "Buy" rating stays the same. The ratings action follows a visit by Bank of America analysts to Tesla's Austin, Texas, gigafactory.
The company highlighted a number of possible development prospects, including Tesla's increasing production of electric vehicles, the forthcoming introduction of its robotaxi service, and longer-term prospects connected to its humanoid robot, Optimus.
Analyst John Murphy and his colleagues voiced hope for Tesla's capacity to use software expansion to increase profitability. Although Tesla's profits are mostly driven by hardware right now, analysts expect a shift toward software-based revenue sources that may greatly improve margins. Full self-driving capabilities, premium connection services, and an extension of Tesla's charging infrastructure expansion constitute key areas for this development. Murphy underlined that these products and services might finally start to significantly affect Tesla's bottom line, hence lessening dependence on car sales by itself.
Bank of America also noted Tesla's advancements in autonomous driving, pointing out that the FSD technology of the firm is approaching a position when driver interventions are required only once per 10,000 miles. With this milestone, Tesla could be able to provide a supervised robotaxi service, therefore offering a major advantage in the market for autonomous cars. Waymo's system now calls for an intervention every 17,000 miles, implying that Tesla is significantly closing the performance difference.
Another element of Tesla's growth underlined by Bank of America is the Optimus project. Aiming to increase productivity and lower running expenses, Tesla intends to install 1,000 Optimus robots in its plants by the end of 2025. The analysts observed that maybe via an equity offering, further funding might be needed to support the computing capacity need for Optimus. Given Tesla's ambitious robotics project offers a fresh path for expansion outside of its main automotive operations, such a move might draw investor interest.
The drive of innovation by Tesla goes beyond hardware and software. With initiatives like the Megapack and Solar Roof integral to Tesla's long-term plan, the firm has also been aggressively extending its energy storage and solar power options. As the worldwide drive for renewable energy becomes more intense, Bank of America thinks Tesla's integrated approach to mobility and energy might help the business maintain a competitive edge.
