Stifel initiates Tesla stock with a Buy rating, sees 45% upside potential

Stifel initiated research coverage of Tesla (NASDAQ:TSLA) with a Buy rating and setting a price target of $265, which implies an upside potential of about 45% based on Tuesday's closing price.

Stifel noted Tesla's strong positioning to deliver robust growth from 2025 to 2027 and beyond.

"In the near term, the revamped Model 3 and upcoming Model Y refresh should bolster sales, followed by the commencement of its next-generation vehicle (Model 2) production, which will likely garner very strong demand," analysts wrote.

"We also believe TSLA's AI-based Full Self-Driving (FSD) initiative has the potential to generate significant value through sales of FSD, possible licensing agreements, and as a critical driver of longer-term RoboTaxi initiatives."

Tesla, led by CEO Elon Musk, is recognized as the global leader in the EV market, holding a dominant share in the United States. Stifel's confidence in Tesla stems from its robust technology portfolio, global manufacturing footprint, and strong profitability.

The brokerage firm also pointed out Tesla's vast global supply chain and internal manufacturing as factors supporting cost advantages and margins.

The Supercharger network was also mentioned as a key element driving brand loyalty, sales, and profitability for Tesla.

Stifel believes that Tesla's pure AI-based FSD technology could generate significant value. This includes sales of the FSD software, possible licensing agreements, and its critical role in the development of RoboTaxi initiatives in the longer term.

Moreover, Tesla's energy generation and storage business is seen as a potentially significant growth driver.

Despite acknowledging near-term risks such as the lackluster first-quarter results in 2024 and potential headwinds in EV adoption, as well as uncertainties surrounding the U.S. election, Stifel suggests that recent downward estimate revisions for Tesla's stock are likely finished, which could remove an overhang on shares of the EV maker.

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