RBC Capital Markets analyst Tom Narayan remains optimistic about EV giant Tesla Inc TSLA in the long term despite the stock’s poor performance over the past year.
Analyst Take: Narayan believes that Tesla is currently between two waves, with the Model 3 and Y largely saturated and the company awaiting the next big boost from its affordable car, expected to be priced below $30,000. The lower-priced Tesla is slated to start production in the second half of 2025, according to the analyst.
“Elon doesn’t think about things on a day-to-day or month-to-month basis; He’s looking at things from a years, if not decades, perspective. Eventually, we’ll get this catalyst with the next-gen vehicle,” Narayan said in an interview with CNBC.
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RBC Capital Markets maintains a ‘buy’ rating on Tesla with a price target of $298. “There are some long-term tectonic things that people aren’t talking about, which folks like me will start writing reports about and get folks interested eventually,” Narayan added.
Only 10% of Narayan’s valuation model is based on Tesla’s core auto business. The remaining relies on Tesla’s autonomous driving efforts and energy storage business. “Nobody’s talking about energy storage; If you guys have ever used FSD, it’s the most amazing product I’ve used since the iPhone,” he said.
Energy Boost: Last year, Tesla’s energy storage deployments reached 14.7 GWh, more than doubling from a year earlier. Energy generation and storage business revenue rose 54% to $6 billion, while profits nearly quadrupled. In January, the company said that it expects its growth rate of deployment and revenue in the energy storage business in 2024 to outpace the automotive end of the business the company is more renowned for.
Why It Matters: As for autonomous driving, Tesla deems it to be the main driver of its market value. Tesla's revenue will get “really crazy” once FSD is approved by regulators, Musk said in January.
Tesla’s FSD software is still in its beta phase, which means it still requires active driver supervision and does not make the vehicle autonomous. However, the company continues to scale its abilities with software updates.
Evercore analysts, however, are not on the same page as Narayan. In a report on Monday, they said Tesla is increasingly a “2027 story” while questioning if the best-case scenario for the cheaper, more affordable Tesla vehicle is more around half a million in 2026 rather than the consensus for 1 million plus, Bloomberg reported.
On Wednesday, Wells Fargo also downgraded the stock from ‘equal weight’ to ‘underweight’ and significantly reduced the price target from $200 to $125, citing concerns about disappointing deliveries and price cuts.
Price Action: Tesla stock closed down 4.12% on Thursday at $162.5. Year-to-date, it has dipped nearly 34.6%, according to data from Benzinga Pro.
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