Even after a sharp recovery in recent weeks, Tesla (TSLA 1.50%) stock has had a rough run this year. But one analyst thinks the odds are good that the latest move higher can continue. Cantor Fitzgerald analyst Andres Sheppard just began coverage on the leading electric vehicle (EV) maker with a recommendation to buy Tesla stock.
The lead equity research technology analyst at Cantor offered a range of possible scenarios and resulting stock prices, but he thinks the most likely outcome from Tesla's business plans will result in a stock price of $230. That would represent a 27% gain from Tesla's closing price on Friday.
Self-driving software and cheaper cars
It may not be unique or surprising to know that the analyst thinks self-driving software and lower priced vehicles can be what pushes Tesla stock higher. Sheppard expects the price cut Tesla recently implemented for its full self-driving (FSD) software, to $99 per month, will boost sales this year.
He believes that base case makes Tesla stock worth $230 per share. But if Tesla also can leverage a successful rollout of a lower priced model beginning next year, he thinks that could spur vehicle sales to as much as 2.8 million in 2025. Early estimates are currently for Tesla to deliver about 2.1 million EVs next year. Sheppard could see the stock trading for $460 per share if it can reach that volume level next year, and FSD sales reach $2 billion in 2025.
However, investors need to think about what would happen in the event those projections don't pan out. Sheppard's bear case is if Tesla were to still hover around the 2 million unit sales volume level in 2025 and not increase FSD revenue. In that case he thinks the stock will drop as low as $70.
I think Sheppard's base case makes sense. Tesla will only be a solid investment from here if sales grow from self-driving software and a more affordable EV offering.
