Ahead of Tesla’s (TSLA) Q2 results, Piper Sandler analyst Alexander Potter noted in a recent research note that concerns about the electric vehicle (EV) maker’s regulatory credits are “not as bad as you think.” The top analyst believes these concerns are “overblown” and that Tesla will continue to book credits through 2025 and 2026.
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Potter remains highly optimistic about Tesla’s long-term outlook. He maintained his “Buy” rating and $400 price target on TSLA stock, which implies 21.8% upside potential from current levels. Potter is a five-star analyst on TipRanks, ranking #465 out of 9,891 analysts tracked. He has a 48% success rate and an average return per rating of 19.70%.
Here’s Why Potter Is Bullish About TSLA Stock
Potter stated that the firm often receives questions about Tesla’s regulatory credits, or the “free money” the company gets for its EVs and batteries. In 2024, Tesla received $3.5 billion in federal credits, which represented almost 100% of its free cash flow last year. However, with President Donald Trump seeking to change the regulatory environment, investors worry that the removal of these credits will threaten Tesla’s earnings outlook. Potter responds, “No, at least not in 2025.”
Potter acknowledges that the White House is committed to eliminating financial support for the EV and battery industries. The Trump administration plans to remove the $7,500 new EV tax credit and the $4,000 used EV tax credit at the end of the third quarter.
Despite this, Potter noted that Tesla will still book $3 billion in credits in 2025 and another $2.3 billion in 2026. He also acknowledged that forecasting the financial impact of credits is a challenging task, and even Tesla struggles to forecast them with accuracy.
Tesla’s Robotaxis Are Set to Offset Federal Losses
While regulatory credits have been a significant benefit bolstering Tesla’s balance sheet, its robotaxi business is poised to offset potential losses from declining credits. Potter is highly encouraged by Tesla’s autonomous robotaxi launch in Austin on June 22. The company’s autonomous vehicles (AVs) are performing well, and Tesla is consistently expanding its service area.
Potter concludes, “In our view, these favorable FSD-related developments are likely to overshadow any/all negative commentary arising from lower 2025/2026 estimates.” He maintained his $400 price target on TSLA, citing his belief that Tesla’s autonomous and artificial intelligence (AI) efforts have a promising future.
Is Tesla a Buy, Hold, or Sell?
Tesla is set to release its Q2FY25 results after the market closes on July 23. The Street expects Tesla to report adjusted earnings per share (EPS) of $0.39 on sales of $22.19 billion. Ahead of the results, analysts remain cautious about Tesla’s outlook.
On TipRanks, TSLA stock has a Hold consensus rating based on 13 Buys, 13 Holds, and eight Sell ratings. Also, the average Tesla price target of $299.52 implies 8.8% downside potential from current levels. Year-to-date, TSLA stock has lost 18.7%.
