Bank of America downgrades Tesla shares and raises price target, saying ‘execution risk is high’

It’s been a tough Tuesday so far for Tesla (TSLA).

In a note to clients, Bank of America analyst John Murphy downgraded Tesla to neutral from buy, claiming that most of the electric car maker’s upside has been recognized since the company upgraded its stock back in April of last year. Since then, Tesla shares have risen more than 60%, although most of that rise came after President Trump won the election in November.

Tesla shares fell 4% in late trading.

However, Murphy raised his price target to $490 from $400, but with some caveats.

“While this still indicates upside, execution risk is high and TSLA is trading at a level that captures much of our fundamental (long-term) potential from core automotive, roboticaxi, Optimus, and energy generation and storage,” Murphy wrote.

From a fundamental automotive standpoint, Murphy sees Tesla pushing its auto market share to 5% globally over the long term, putting it among the top 10 automakers. Tesla’s upside: The ongoing trend toward electrification, Tesla’s lower cost structure compared to other automakers, and technological superiority with software features like full self-driving.

Additionally, new vehicles will expand Tesla’s total addressable market or maximum available revenue opportunities, which is required for more impactful growth beyond product updates. Murphy expects Tesla to launch its low-cost car in the first half of 2025 as well as another new model coming later this year.

Murphy was the most optimistic about the launch of robo-taxis, which he sees as being worth $420 billion in the US alone. “This reflects our assumption that TSLA can achieve a significantly lower cost per mile than Uber, Lyft and taxis, enabling it to price aggressively, expand the total addressable market, as well as achieve a significantly higher profit per mile,” he wrote.

Danger? to implement. In addition to expanding the testing scope of robotaxis and launching the service on time without major obstacles, Tesla will also have to launch new products in 2025 on time, expand the scope of its robotaxi division without dismantling its entire self-driving software business, and deal with… Competing with Chinese electric vehicles, negotiating an uncertain regulatory framework in the US and abroad – all while using EVs Facing weak demand.

Potential positives: licensing of self-driving software, and technological breakthroughs achieved by Tesla, And the possibility of providing additional federal or government incentives.

Murphy did not mention the impact of the close relationship between CEO Elon Musk and President-elect Donald Trump, which could help the automaker secure a favorable regulatory environment. Earlier on Tuesday, for example, NHTSA has opened a safety investigation In the already independent Tesla Smart Summon feature – an investigation that could be limited if a more suitable Tesla management were in control.

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