Tesla (NASDAQ:TSLA) is fast becoming a bet on physical AI and automation rather than a traditional car company. Barclays analyst Dan Levy sees that shift gaining traction, pointing to the company’s Q4 results as a turning point, with the end of Model S/X production marking what he calls a “symbolic baton pass” away from its legacy auto business and toward autonomy and robotics.
Claim 30% Off TipRanks
Forget margin or options. Here's how the pros trade TSLAFrom now on, autonomy (Robotaxi, FSD) and bots will be Tesla’s “core growth focus.” Last month marked another major stage in that transition, when Tesla revealed its Terafab plans, outlining an “ultra aspirational plan” of constructing a 1 TW fab. That scale would be roughly 50 times the current global AI compute capacity in the industry and would push Tesla toward an even greater degree of vertical integration. In addition, Tesla is targeting 100 GW of solar capacity, and early steps toward that buildout appear to already be underway.
“These developments are reminders of the exciting growth opportunity ahead for Tesla, further strengthening the ‘meme’ element of the stock,” said Levy.
However, with the company slated to release Q1 earnings on Wednesday (April 22), on top of questions around the execution of both Terafab and the solar build-out, Levy thinks a central issue is the extent of additional capex the company might need to commit to these projects. This is especially relevant for Terafab, which could require a mid-single-digit trillion-dollar investment if it is fully developed.
“While we don’t expect Tesla capex to exponentially increase, we nevertheless expect a further step in capex from the elevated $20bn+ figure Tesla talked to on the last call,” Levy opined.
With all that is going on at Tesla right now, Levy notes that the narrative has become “somewhat convoluted as of late,” with investors divided over what will ultimately drive the stock amid its various “moonshot” initiatives.
Robotaxi and FSD progress and scaling remain in focus, but the robotaxi rollout has been viewed by many investors as “somewhat slow,” with Tesla currently operating only a small fleet of around 30 to 50 vehicles in Austin, most of which still include a safety monitor.
On bots, interest in humanoid robots has intensified recently, and Tesla is widely seen by investors as a leading US player in bot development. However, Levy continues to view the Optimus opportunity as a “show me” story.
But what about the core auto business, which, after all, still generates the bulk of revenue? It’s clear at this stage that it is “in less focus.”
“We believe it’s well understood that Tesla’s fundamental outlook is quite soft, with negative revisions to both volumes and EPS ahead,” Levy said. “Yet for now we expect Tesla stock to remain detached from fundamentals.”
Bottom line, Levy isn’t buying into the hype just yet. The analyst assigns TSLA shares an Equal Weight (i.e., Neutral) rating alongside a $360 price target, pointing to about 10% downside from where the stock trades today. (To watch Levy’s track record, click here)
10 other analysts are also staying on the sidelines, and while 13 Buys and 6 Sells point to a divided view, it all adds up to a Hold consensus rating. Based on the $401.13 average price target, TSLA shares are expected to hover near current levels over the next year. (See TSLA stock forecast)
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.