Tesla Enthusiasm Continues: BoA Gives 3 Reasons to Strongly Buy Now

Tesla's enthusiasm starts with Elon Musk's successful bet on Trump, and the rally is still ongoing. Some skepticism has arisen, suggesting that the real benefits are limited. However, as Wall Street reassesses the fundamentals of the EV giant, the conclusion is: It's much stronger than anticipated.

Bank of America issued a strong bullish report on Thursday, highlighting the potential of Tesla's autonomous robotaxi, self-driving FSD, and humanoid robot Optimus after a visit to Tesla's Gigafactory in Texas. The bank raised its price target from $350 to $400.

Boosted by the news, Tesla's stock rose over 3%, hitting its highest level since April 2022. The stock has soared 48% this year, doubling from its low at the end of August.

Lead analyst John Murphy stated that the visit included meetings with Tesla's investor relations team, a factory tour, and a test drive. The trip gave us increased confidence that TSLA is well-positioned to grow in 2025+ with its core EV business (new vehicles will expand its TAM) and launch of its robotaxi offering, and longer-term from its investments in Optimus, said the report.

 FSD Impresses; Autonomous Driving Set to Boom

He particularly emphasized the progress of Tesla's FSD, stating, TSLA showcased the capabilities of FSD, which were impressive and much improved from prior versions. Vehicles equipped with the latest FSD versions 12.5 and 13.2 can autonomously navigate challenging roads. Tesla expects to soon achieve its goal of needing only one human intervention every 10,000 miles, laying the foundation for the company's autonomous robotaxis set to launch in 2025.

"The Cybertruck and Model Y we rode in drove seamlessly to a charging station several miles away despite abnormal road conditions, traveling on roads under construction and taking a tough left turn against traffic," Murphy wrote, suggesting that Tesla's robotaxi business appears ready.

Tesla's financial strength will keep it far ahead of its peers. While companies like Waymo seem to have an early lead in autonomous driving, the bank pointed out that Tesla's rapid AI computing expansion using 50,000 H100 chips gives it an advantageous position.

Tesla's main growth driver is the forthcoming low-cost, autonomous electric vehicle, the Robotaxi, which Tesla previously mentioned is expected to launch in the first half of 2025.

Murphy believes the new vehicle will increase Tesla's TAM (total addressable market), cost less than $30,000, and benefit from a lower cost due to factors like "de-contenting, making the motor more efficient and thereby enabling a smaller battery, and changing the interior." This might not be the only model Tesla launches next year.

Furthermore, the qualitative growth of Robotaxi and FSD will further enhance Tesla's profit margins.

Humanoid Robots Advancing Faster Than Expected: Mass Production and High-End Projects

Bank of America noted that Tesla's humanoid robot Optimus is another focal point. Currently, Tesla has deployed these robots for internal tasks such as sorting 4680 battery packs. By next year, the Optimus fleet may expand to 1,000 or even thousands of units.

Analysts believe that as Tesla's autonomous robotaxi technology matures, its computing power will shift towards Optimus development. This will accelerate robot training, making production costs likely to significantly decrease by 2026.

In the future, Tesla's profit growth will shift from hardware to software-driven, realized through high-end services like FSD and connectivity.

Although Tesla's main focus is still on selling electric cars, to investors, their products are more like robots on four wheels. As FSD, humanoid robots, and potential AI services further open up the market, Tesla's momentum will be further unleashed. If Tesla can truly demonstrate its level as an AI company, catching up with the other six major U.S. stock giants is not far-fetched.