TLDR
- Melius Research initiates Buy rating on Tesla with $520 price target as shares climb 72% in six months
- Analyst Rob Wertheimer says Tesla leads AI revolution in automotive with superior computing management and autonomous driving tech
- Automotive gross margin dropped to 17.2% from 28.5% peak as EV competition intensifies and price cuts impact profitability
- Stock rose over 5% on coverage launch despite TipRanks consensus Hold rating with $366 average target
- Tesla gained 186% over five years but investors should monitor core EV business metrics over future robotaxi potential
Tesla stock surged over 5% after Melius Research launched coverage with a Buy rating. Analyst Rob Wertheimer set a $520 price target on the shares.
The target represents 19% upside from current levels around $436. Tesla has rallied 72% over the past six months.
Wertheimer calls Tesla essential for investors focused on artificial intelligence opportunities. He believes the automaker will lead AI transformation across industries.
The analyst highlighted Tesla’s advantage in managing computing power. Most companies struggle with growing computational needs, but Tesla handles it effectively.
Wertheimer praised innovation speed at Tesla, SpaceX, and xAI. He noted xAI deploys data centers faster than nearly all AI competitors.
Tesla’s manufacturing flexibility earned recognition too. The company’s willingness to take risks, like building cars in tents, has paid off repeatedly.
Autonomous Driving Leads AI Push
Wertheimer views self-driving technology as Tesla’s first major AI breakthrough. The company’s hardware expertise and data collection give it a competitive edge.
Tesla can improve autonomous systems faster than rivals, according to the analyst. He sees this as the beginning of AI disruption across multiple sectors.
However, full autonomy remains years away. Weak EV demand could also pressure short-term financial results.
Tesla shares have returned 186% over five years and 2,710% over the past decade. Much of that growth came from investor belief in future potential.
The core business tells a tougher story. Automotive gross margin dropped to 17.2% in Q2 from 28.5% in 2022.
Margin Pressure Reflects Market Reality
The EV market has grown more competitive. Tesla now battles established automakers and new entrants globally.
Price cuts have helped maintain sales volume. But lower prices directly impact profitability margins.
Recent performance shows Tesla responding to economic headwinds like traditional carmakers. The company appears more sensitive to macro factors than its valuation suggests.
Year-to-date, Tesla stock is up 7.9%. But it trades above Wall Street’s consensus view.
TipRanks data shows a Hold rating based on 16 Buys, 13 Holds, and nine Sells. The average analyst price target is $366, implying 16% downside.
Wertheimer’s $520 target sits far above consensus. His bullish stance focuses on long-term AI capabilities rather than near-term margin challenges.
The analyst acknowledges risks including slow progress toward full self-driving. Soft EV demand remains a concern for quarterly results.
Tesla’s market cap exceeds $1.4 trillion. The valuation reflects expectations for breakthrough innovations beyond traditional automotive.
Investors face a choice between betting on AI-driven transformation or focusing on current automotive fundamentals. Wertheimer clearly favors the former approach with his Buy rating and $520 target on Tesla stock.
