Analysts at Bank of America have raised their price target on ‘Buy’-rated Tesla Inc (NASDAQ:TSLA) following a visit to the electric vehicle maker’s Gigafactory in Austin, Texas.
They boosted their price objective on Tesla to $400 from $350. Shares of Tesla traded up 3.3% at about $370 late morning on Thursday.
The analysts wrote in a note to clients that their visit to the facility, which included a factory tour and ride and drive, gives them increased confidence that Tesla is well positioned to grow in 2025 and beyond with its core EV business, launch of its robotaxi offering, and investments in its humanoid robot Optimus.
“Tesla showcased the capabilities of Full Self Driving (FSD), which were impressive and much improved from prior versions,” they wrote.
“The Cybertruck and Model Y we rode in were equipped with versions 12.5 and 13.2 and drove seamlessly to a charging station several miles away despite abnormal road conditions, travelling on roads under construction and taking a tough left turn against traffic.”
Tesla told the analysts that soon FSD will only require an intervention once every 10,000 miles, suggesting its capabilities could support a 2025 launch of its robotaxi business.
They noted as a point of reference that Waymo’s robotaxi service launched before achieving one intervention every 17,000 miles, which Tesla believes it can achieve shortly.
Additionally, Tesla told analysts that it plans to have more than 1,000 Optimus operating in the plant by the end of 2025. Analysts expect production costs will be driven lower by an acceleration in Optimus’ capabilities.
“The Optimus opportunity (and others) could potentially benefit from more capital via an equity raise to fund greater compute capacity, which we believe would be welcome by most Tesla investors,” they wrote.
The bank’s analysts also highlighted Tesla’s opportunities to improve margins, which are currently driven by hardware but will shift to more margin-accretive software with the growth of FSD, premium connectivity, and charging.