Tesla stock (TSLA) cooled slightly on Tuesday after a huge jump to start the week, yet one Wall Street analyst thinks the rally is still in early innings. The bigger question sits with the rest of the auto industry, which is struggling to keep up with what self-driving cars could do to their business.
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Tesla shares slipped about 0.5% in early trading to around $415.83 after a 6.8% gain on Monday. Coming into Tuesday, the stock was up roughly 3% year to date and 19% over the past 12 months.
Wertheimer Lifts Tesla Stock Target to $525
Melius Research analyst Rob Wertheimer doubled down on Tesla’s autonomous upside, keeping a Buy rating and raising his price target to $525 a share. The call leans heavily on the pace of improvement in Tesla’s Full Self Driving software and the way it changes how the car should be valued.
“Over the past decade and even up to a year or two ago, we assumed others could catch up quickly,” Wertheimer wrote. “Now we are not quite so sure…we are thinking about chips, vertical integration, software, and the decision to think of the vehicle differently. The auto business is an old one, and perhaps too much of operations and strategy for legacy automakers was aimed at cost.”
For him, Tesla looks less like a car company and more like a software and robotics platform wrapped in a vehicle. This framing helps explain why he is comfortable with a higher target than most of the Street even after a choppy year for the stock.
Legacy Carmakers Resist Licensing Tesla Full Self Driving
Traditional automakers could in theory narrow the gap by licensing Tesla’s technology. Elon Musk says they are not interested.
“I’ve tried to warn them and even offered to license Tesla FSD, but they don’t want it! Crazy,” Musk posted on Monday. “When legacy auto does occasionally reach out, they tepidly discuss implementing FSD for a tiny program in five years with unworkable requirements for Tesla, so pointless.”
Wertheimer thinks that attitude could prove costly. He compares the shift to the early days of the automobile, noting that “Karl Benz launched the first production car in 1893 at the Chicago World’s Fair. Twenty-five years later, horse carriages and related items were down 60%, and if not for the depression, the final collapse might have come sooner.”
In his view, the industry is facing a similar moment where slow movers risk becoming the next carriage makers.
Is Tesla a Buy, Hold, or Sell?
Turning to Wall Street, analysts have a Hold consensus rating on TSLA stock based on 14 Buys, 10 Holds, and 10 Sells assigned in the past three months, as indicated by the graphic below. This kind of dispersion signals deep disagreement on how quickly Tesla can turn self-driving hype into durable cash flows.
After a 23.4% rally in its share price over the past year, the average TSLA price target of $383.37 per share implies 8.24% downside risk.
For investors, the trade-off is simple but uncomfortable. If Wertheimer is right and legacy automakers really do “seem many years behind,” Tesla stock still has room to run. If the industry catches up faster than expected, Monday’s surge could end up looking more like a victory lap than the start of the next leg higher.
