Tesla Analyst On High-Stakes Future: Optimus, Robotaxi, FSD Have Potential, But Execution Risks Loom

Tesla Inc TSLA stock soared in 2024 as investors could be focused on long-term catalysts like FSD, robotaxis and Optimus and not the short-term concerns about a fourth-quarter delivery miss.

A Tesla analyst shares a Tesla sum-of-the-parts valuation and what could have the highest impact on the future of the company.

The Tesla Analyst: Bank of America analyst John Murphy downgraded Tesla from Buy to Neutral and raised the price target from $400 to $490.

The Analyst Takeaways: Tesla has long-term catalysts, but the rise in the stock price in 2024 could put valuation into question, Murphy said in a new note.

"Valuation captures much of long-term potential from autos, robotaxi, other and execution risk is high," Murphy said.

Murphy said there is still upside to Tesla stock, but the stock price increase limits the long-term potential.

Tesla's robotaxi segment is called the biggest opportunity by Murphy, a segment that he believes could account for nearly 50% of the company's valuation and be worth $420 billion in the U.S. and over $800 billion globally in the future.

"At scale, Tesla will have a large cost advantage relative to Uber and Lyft given the lack of a driver. With this sizable cost advantage, TSLA's robotaxi service could offer rides at a much lower price to the consumer and still have higher margins."

Murphy said the robotaxi launch in 2025 "could be start of something big" for Tesla.

The analyst said the valuation of FSD is also sizable in the future and in the early stages of being monetized.

"FSD should have meaningfully higher margins than TSLA's core auto business and could generate billions in EBIT annually."

Murphy said the adoption rate for FSD is moving higher and should continue in that direction with new updates.

One potential long-term risk could be the robotaxi business eventually cannibalizing FSD earnings, but Murphy said this is unlikely to occur anytime soon.

Execution risks going forward include introducing new models, including a low-cost vehicle in 2025, launching robotaxis in 2025 and started production of Optimus. Delays to this timeline could impact the share price.

Murphy also said there is a risk of new policies under the new White House administration being less favorable to Tesla than expected, given the sharp rise in share price after the 2024 election.

Here is Murphy's sum-of-the-parts valuation for the Tesla segments:

Auto: $180 billion to $415 billion, $275 billion at mid-point, 16% of valuation
Robotaxis U.S.: $296 billion to $798 billion, $421 billion at mid-point, 24.5% of valuation
Robotaxis International: $296 billion to $798 billion, $421 billion at mid-point, 24.5% of valuation
FSD U.S.: $176 billion to $432 billion, $240 billion at mid-point, 14% of valuation
FSD International: $176 billion to $432 billion, $240 billion at mid-point, 14% of valuation
Optimus: $14 billion to $95 billion, $36 billion at mid-point, 2% of valuation
Energy: $68 billion to $101 billion, $82 billion at mid-point, 5% of valuation
Total: $1,206 billion to $3,071 billion, $1,714 billion at mid-point

The sum-of-the-parts valuation assigns a value of $1.7 trillion to Tesla at the mid-point, equaling $490 per share. The valuation range for shares is $345 to $878 in the latest update.

TSLA Price Action: Tesla stock is down 4.13% to $394.06 on Tuesday versus a 52-week trading range of $138.80 to $488.54. Tesla stock is up 66% over the last year.

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