Bank of America Boosts Tesla Target to $400 Amid Autonomy and Robotics Boom

Bank of America has demonstrated its confidence in Tesla by increasing its price target for the electric carmaker to $400, up from a previous target of $350, and reaffirming its buy rating. This comes as a response to the promising growth outlook for Tesla beyond 2025, driven by advancements in autonomous driving and robotics, including significant progress in Full Self-Driving (FSD) technology.

John Murphy, an analyst at Bank of America, visited Tesla's Gigafactory in Texas and expressed confidence in Tesla's capabilities. He highlighted that the development of FSD has been impressive, with adoption rates on the rise and the Optimus project expected to accelerate. As Tesla expands its model range next year, the company is projected to increase its total addressable market (TAM).

Tesla's recent stock performance has been noteworthy, hitting a two-year high, with multiple brokerages adjusting their price targets. Murphy noted that Tesla aims to widen its profit margins, which are currently hardware-driven. However, as services like FSD and charging expand, there is a shift towards more profitable software offerings.

Looking toward the future, Murphy projected that Tesla would launch a more affordable vehicle by the first half of 2025, potentially priced under $30,000, including the existing $7,500 U.S. EV tax credit. This model is designed to broaden Tesla's market reach and isn't slated to be the only new model for 2025.

Furthermore, Tesla's subscription model for FSD seems to be gaining traction, switching from an upfront cost to a subscription, which has spurred faster adoption. As of early 2023, Tesla has 400,000 FSD subscribers across 1.8 million compatible vehicles, with momentum outpacing the growth of eligible vehicles into 2024.

The Optimus development is also set to accelerate, with Tesla planning to deploy around 1,000 Optimus robots in their facilities by the end of 2025. This showcases Tesla's strategic integration of robotics to boost production efficiency, which is expected to mature alongside their autonomous driving technology into 2026 and beyond.