4 Keys Catalysts to drive Tesla stock in 2025 EPS Consensus up 32.4% YoY

1) What happened

• After doubling in value in 2023, TSLA shares are up more than 70% in 2024, with most of the gains coming since Donald Trump’s election victory last month.

• Electric vehicle (EV) giant Tesla’s TSLA rally just doesn’t seem to stop. Its shares rose for the sixth straight trading session yesterday to close at $424.77, hitting a record high.

Update:

As of last Friday, Tesla stock closed at $436.23 a record high and +75.6% YTD. The historical high or 52-wk high is $436.30

2) What the analyst said

The bullish sentiment around Tesla is evident from the recent price target upgrades from prominent brokers. Bank of America (BofA) Securities raised its price target from $350 to $400, citing Tesla’s advancements in Full Self-Driving (FSD) technology and the potential launch of its robotaxi fleet. Similarly, Wedbush Securities’ Dan Ives emphasized Tesla’s leadership in artificial intelligence (AI) and autonomous driving, dubbing it the market’s most undervalued AI play. Goldman Sachs and Morgan Stanley also joined the chorus, lifting their price targets to $345 and $400, respectively

3) How far will Tesla go?

The stock is trading above 50 & 200-Day SMA. Despite these elevated targets still sitting below the current stock price, analysts argue that Tesla’s growth story is far from over. With the stock’s momentum and a potential Santa Rally on the horizon, it wouldn’t come much as a surprise if Tesla breaches the $500 mark before the year ends.

4) 4 Key Catalysts to Drive Tesla in 2025
Full Self-Driving and Robotaxi Potential:

Tesla’s FSD software has made significant strides, with the latest update (version 13.2) introducing features like reverse driving and auto-parking. Early user feedback suggests the company is nearing a breakthrough in autonomous driving. With regulatory support under the new administration, Tesla’s much-anticipated robotaxi service could become a reality by 2025. Musk has promised ride-hailing robotaxis in Texas, California and a few other states by next year. As General Motors GM quits the robotaxi race, Tesla’s main competition narrows to Alphabet’s GOOGL Waymo.
Energy Generation and Storage Expansion:

Tesla’s energy division has been a standout performer, with revenues growing at a triple-digit compound annual growth rate (CAGR) over the past three years. This segment, which includes products like the Megapack, boasts the highest margins among Tesla’s business units. The ramp-up of the Megapack factory to meet soaring demand positions Tesla to capitalize on the global energy transition.

Tesla’s extensive North American Charging Standard (NACS) network, with over 60,000 supercharger connectors globally, has emerged as a significant revenue driver. The adoption of Tesla’s charging standard by major automakers (including GM, Ford and others) underscores its dominance in this space, creating a lucrative long-term growth opportunity.

The Cybertruck has quickly become a bestseller, ranking as the third most popular EV in the United States in the September quarter. The model achieved positive gross margins for the first time, highlighting its profitability potential. The Cybertruck’s success reinforces Tesla’s innovation-driven brand image.

Musk’s forecast of 20%-30% growth in vehicle deliveries for 2025 underscores Tesla’s robust demand trajectory. TSLA has also made progress in improving automotive gross margins (excluding leasing and regulatory credits), which rose to 18.6% last quarter due to lower raw material and logistics costs.

Tesla exited the third quarter of 2024 with over $33 billion in cash and equivalents, alongside a long-term debt-to-capitalization ratio of just 7% — significantly lower than the industry average. With record operating cash flows of $6.3 billion last quarter, Tesla has the financial flexibility to pursue growth initiatives and weather potential market headwinds.

5) Tesla Growth Estimate

The Zacks Consensus Estimate for Tesla’s 2025 Sales and EPS implies a year-over-year uptick of 17.4% and 32.4% (from 0.74 to 3.27) respectively.

My Take:

• Tesla is no longer just an automaker but a transformative force in the clean energy and technology sectors. It is an outdated view if you see the company as only an carmaker.

• With a robust pipeline of growth catalysts, including advancements in autonomous driving, a thriving energy business, and strong vehicle delivery expectations, Tesla’s outlook for 2025 is quite promising. The article has not factored in the Tesla humanoid robot, Optimus which is operating in the factory and plans to scale in 2025.

• The “Trump bump” adds another layer of optimism, providing policy support for Tesla’s innovative endeavors. Trump is still supporting Elon Musk based on what he said in the recent Times Magazine interview and his presence in SpaceX's Starship Test Flight 6.

• While some may argue that Tesla’s stock has rallied too far too fast, its upward trajectory appears sustainable, given the company’s unparalleled market position and growth potential.

•  Starting March 1, 2025, drivers will be allowed to use self-driving technology on Swiss motorways. This has made Tesla one step closer to roll out Full Self Driving service in Europe in the first quarter of 2025.

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