Analysts at Bank of America (BAC) have downgraded the stock of electric vehicle maker Tesla (TSLA) to Neutral from Buy, citing valuation concerns.
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While the bank raised its price target on the stock to $490 from $400, John Murphy, a four-star rated analyst, warns that, “Execution risk is high and TSLA is trading at a level that captures much of our base case long-term potential from core autos, robotaxi, Optimus, and energy generation & storage.”
According to Murphy, Tesla’s self-driving robotaxi venture now offers the largest opportunity for the automaker, accounting for roughly 50% of its current valuation. The service, which may launch this year, could be valued at $420 billion in the U.S. and over $800 billion globally.
High Risk Levels
While Bank of America remains bullish on Tesla’s full self-driving technology and ambitions in the space, Murphy and his team nevertheless see high execution risks in the coming year. In particular, the bank is worried about difficulties for Tesla in carrying out various initiatives, which also include robots, artificial intelligence (AI), and super computers.
In his note to clients, Murphy expressed worries about the high valuation of TSLA stock following a big recent run in the share price. TSLA stock has risen 60% in the last three months, with much of that gain coming since Donald Trump was re-elected U.S. president on November 5.
On the same day as Bank of America’s downgrade, the U.S. National Highway Traffic Safety Administration said separately that it is looking at almost 2.6 million Tesla cars with the “Smart Summon” capability over safety concerns. TSLA stock is down 5% on the day.
Is TSLSA Stock a Buy?
Tesla stock currently has a consensus Hold rating among 34 Wall Street analysts. That rating is based on 13 Buy, 12 Hold, and nine Sell recommendations made in the last three months. The average TSLA price target of $320.90 implies 18.20% downside risk from current levels.
