On Wednesday, Baird, a financial services company, increased its price target for Tesla shares (NASDAQ:TSLA) shares to $480 from the previous target of $280. The firm maintained an Outperform rating on the electric vehicle manufacturer's stock.
Tesla's stock, currently trading at $479.86, has shown remarkable momentum with a 159% surge over the past six months and is trading near its 52-week high of $483.99. According to InvestingPro analysis, Tesla appears to be trading above its Fair Value, with analyst targets ranging from $116 to $528. The revision reflects the firm's growing confidence in Tesla's prospects for the year 2025, citing several positive factors influencing this outlook.
The analyst from Baird highlighted a range of developments contributing to the more bullish stance. Among these were the expedited regulatory process for Tesla's new Cybercab, ongoing cost reductions, and the planned launch of more affordable vehicle models in the first half of 2025. Additionally, the connections between Tesla's CEO Elon Musk and President-elect Trump were seen as a positive influence on the company's future.
The new price target is based on approximately 57 times Baird's 2028 EBITDA (earnings before interest, taxes, depreciation, and amortization) estimate, which is then discounted back to the end of 2025 using a 9% rate. InvestingPro data shows Tesla's current EV/EBITDA multiple at 114.79x, with a last twelve months EBITDA of $13.24 billion.
This valuation represents a premium compared to the average of Tesla's large-cap, high-growth peers, which typically trade around 22 times EBITDA, with a range spanning from 4 to 53 times.
Baird's revised forecast also includes adjustments to Tesla's financial estimates. While the gross profit outlook for 2025 has been lowered, this is partly compensated by an expected increase in regulatory credit sales. The firm anticipates these sales to be more sustainable than previously thought, as competitors face challenges in scaling up their production.
The analyst's commentary provided a detailed rationale for the price target adjustment and the maintained Outperform rating, reflecting a strong belief in Tesla's continued growth and the impact of favorable industry and regulatory conditions.
InvestingPro rates Tesla's overall financial health as "GOOD" with a score of 3.0 out of 5.0, offering investors additional confidence in the company's fundamentals. For deeper insights, investors can access Tesla's comprehensive Pro Research Report, one of 1,400+ detailed company analyses available on InvestingPro, along with 24 additional ProTips about Tesla's current market position.
In other recent news, Tesla has been the subject of several developments. The Trump administration's transition team proposed the removal of a vehicle accident reporting rule, a change that could favor Tesla, which has reported over 1,500 crashes under the current regulation. Senator Elizabeth Warren has expressed concern about Tesla owner Elon Musk's role in the transition process, citing potential conflicts of interest.
GLG Research analyst Gordon Johnson has questioned the cause of Tesla's recent stock surge, suggesting it may be due to an options gamma squeeze rather than improved company fundamentals.
Meanwhile, Mizuho (NYSE:MFG) Securities has upgraded Tesla's stock to 'Outperform' from 'Neutral' and significantly raised its price target, citing potential benefits from new Trump administration policies and Tesla's competitive positioning in the electric vehicle market.
RBC has added Tesla to its S&P 500 ESG Darlings list, which comprises top holdings in sustainable funds. These developments reflect the evolving landscape for Tesla in the financial and political arenas.
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