Tesla could follow a 4-part path to 35% stock upside after shaking off earnings worries, BofA says
Taylor Hill
- Tesla stock could surge 35% after its first-quarter earnings results, according to Bank of America.
- The bank upgraded Tesla stock to "Buy" and detailed a 4-part plan that could boost the stock.
- "The tide in news flow appears to suggest the risk to the stock is skewing more positively," BofA said.
Positive catalysts are starting to build for Tesla after it announced a dismal first-quarter earnings report, according to Bank of America.
Tesla reported lower-than-expected profits and revenues in the quarter but said it plans to accelerate its development of a low-cost vehicle after concerns were building that the company would ditch a lower priced model completely to focus on its robotaxi efforts.
The bank said that Tesla essentially cleared the deck of bad news, which sets the stock up for significant upside if it follows a four-part plan that includes an affordable vehicle and the buildout of a robotaxi network.
Bank of America analyst John Murphy upgraded Tesla stock to "Buy" from "Neutral" and reiterated his $220 price target, representing potential upside of 35% from current levels.
Here's the four-part plan that could catapult Tesla higher and reverse its year-to-date sell-off of about 35%, according to Murphy.
1. "New model launches coming sooner and more efficiently than expected."
2. "Robotaxi event on August 8th will showcase FSD and the next-gen platform."
3. "Cost savings with a $1bn+ target run-rate when separations occur later this year."
4. "Potential licensing of FSD even as early as the end of the year for 1 to 2 major OEMs."
"Admittedly, the combination of all of these may not structurally change the long-term path of the company, but in the near-term the tide in news flow appears to suggest the risk to the stock is skewing more positively," Murphy said.
Investors are reacting positively to Tesla's earnings report and its commitment to building a low-cost vehicle, with the stock surging as much as 14% in Wednesday trades despite the missed results.