Tesla (TSLA -0.33%) shares have declined 15% year to date amid a flurry of bad news. The company lost 7 percentage points of market share in the first quarter, ceding the top position in electric car sales to Chinese automaker BYD, as demand deteriorated across China, Europe, and the United States.
Those market share losses were due in part to factory updates that limited production of the Model Y, which still ranks as the best-selling car on the planet. However, CEO Elon Musk's involvement in politics added to the problem. And President Donald Trump created another headwind for the company by imposing a 25% tariff on imported auto parts.
Fortunately, shareholders just got good news from Wedbush analyst Dan Ives. Encouraged by the upcoming robotaxi launch in June and Musk stepping back from the Department of Government Efficiency to refocus on Tesla, he raised his target price to $500 per share. That implies 47% upside from its current share price of $339. "We believe Tesla remains the most undervalued AI play in the market today," Ives wrote.
Better yet, shareholders also got some good news from CEO Elon Musk. Read on to learn more.
Image source: Getty Images.
Elon Musk believes Tesla will be the most valuable company in the world
On the first-quarter earnings call, CEO Elon Musk told analysts, "I continue to believe that Tesla, with excellent execution, will be the most valuable company in the world by far. ... It may be as valuable as the next five companies combined."
Musk made a similar comment on the fourth-quarter earnings call a few months earlier: "There is a path where Tesla is worth more than the next top five companies combined. And that is overwhelming due to autonomous vehicles and autonomous humanoid robots."
The top five companies -- Apple, Microsoft, Nvidia, Amazon, and Alphabet -- currently have a collective market value of $14 trillion, and Tesla is worth about $1 trillion. So, Musk's prediction currently implies 1,300% upside as the company leans into major opportunities in autonomous driving and robotics products.
Elon Musk believes Tesla will dominate the robotaxi market
For years, Elon Musk has insisted Tesla is more than an electric car manufacturer. Instead, he has frequently told analysts that Tesla is better described as an autonomous driving and humanoid robotics company. "I see a path to creating an artificial intelligence [AI] and robotics juggernaut of truly immense capability and power," he said in January 2024.
Tesla has finally reached a turning point where those ambitions could become a reality. The company plans to launch its first autonomous ride-sharing service in Austin, Texas, next month, with other U.S. cities to follow before the end of the year. Musk believes autonomous driving could "move the financial needle in a significant way" by the second half of next year.
Alphabet's Waymo beat Tesla to the market by several years. It already provides robotaxi services in several U.S. cities. But Musk thinks Tesla will eventually have 99% market share due to certain advantages. First, Tesla has more cars on the road, so it has more data to train its AI models. Second, its full self-driving software relies entirely on computer vision, which is cheaper than using the radar and lidar sensors that Waymo uses.
Additionally, Tesla should be able to scale its autonomous ride-sharing business much more quickly because it plans to crowdsource vehicles. "We'll have a model which is kind of like a combination of Uber and Airbnb. So, if you're a Tesla owner, you'll be able to add or subtract your car from the fleet," Musk explained during a recent CNBC interview.
Wall Street currently expects Tesla's earnings to grow by 13% annually through 2026. That makes the current valuation of 150 times earnings look very expensive. But the consensus includes estimates from 54 analysts, not all of whom think Tesla will successfully transition into AI and robotics. So, investors need to decide for themselves whether they think the company can make that leap.
Anyone who believes Tesla will disrupt the mobility market with autonomous driving technology (and the labor market with autonomous humanoid robots) should own the stock. However, Elon Musk himself has warned, "If somebody doesn't believe Tesla is going to solve autonomy, I think they should not be an investor in the company."
