Tesla’s Record-Breaking Rally Continues With New $500+ Price Target, But Retail Sentiment Lags

Tesla, Inc. shares rose over 2% on Monday, building on their record close of $436.23 in the prior session. 

The rally followed Wedbush analyst Daniel Ives’ decision to raise Tesla’s price target to $515, up from $400, marking the highest price target on Wall Street. 

Ives maintained his ‘Outperform’ rating, pinning hopes on growth opportunities in AI and autonomous driving under a Trump White House, which he expects will ease federal regulatory hurdles.

Wedbush estimates Tesla’s AI and autonomous opportunity at $1 trillion and sees the potential for Tesla to hit a $2 trillion market cap by the end of 2025. 

Ives added that Tesla’s forward momentum hinges on growing demand from China and key advancements in its Full Self-Driving (FSD) technology. 

Wedbush expects FSD penetration to surpass 50%, significantly enhancing Tesla’s margins and financial model. 

Additionally, Ives described Tesla’s humanoid robot, Optimus, as a potential “major upside catalyst” that is yet to be factored into the valuation.

The analyst framed Tesla as a disruptive technology leader rather than merely an automaker, citing the company’s transition into the “autonomous and AI era.” 

He also highlighted geopolitical risks, including potential retaliatory policies from China amidst elevated tariffs, but anticipated some exemptions for Tesla in key discussions under the Trump administration.

“In essence, Musk made a strategic and big bet on a Trump White House win that will be known as a ‘bet for the ages’ for TSLA bulls,” Ives wrote.

TSLA sentiment and message volume Dec 16 as of 10:15 am ET | source: Stocktwits

While Tesla’s stock has surged over 75% year-to-date, retail sentiment appears more reserved, at ‘bearish’ levels on Stocktwits Monday morning. 

Pessimistic commentary gained momentum, with some questioning the rationale for the price target hike.

One user argued that Tesla’s fundamentals have not materially shifted to justify the change, while others speculated about a potential 30-50% drop in the stock if immediate FSD or robotaxi revenue fails to materialize.

Despite these reservations, Tesla’s long-term plans, including a lower-cost EV model and the launch of a robotaxi service in 2025, continue to draw bullish projections. 

However, the company’s valuation remains a focal point, trading at a trailing price-to-earnings (P/E) ratio of 119 and a forward multiple of 125 based on 2025 estimates. 

Compounding concerns are falling EV prices and stiffer competition, which have led some analysts, including Goldman Sachs, to forecast flat deliveries for 2024.

Tesla’s ambitious vision for FSD and AI development positions it uniquely in the market, but the road ahead may hinge on execution amid intensifying competitive and macroeconomic pressures.

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