MW Tesla's stock gets a boost from awaited update to Full Self-Driving software

By Tomi Kilgore

Stifel analyst becomes Wall Street's new top bull on Tesla's stock citing 'significant' potential of AI-based FSD capabilities

Shares of Tesla Inc. were starting December with a gain, as investors cheered the long-awaited update to electric-vehicle giant's Full Self-Driving software.

The "significant" potential from Tesla's $(TSLA)$ artificial intelligence-based FSD offering, which fuels Chief Executive Elon Musk's Robotaxi dreams, led Stifel analyst Stephen Gengaro to lift his stock price target to be the highest on Wall Street.

It helps that Musk has endeared himself with President-elect Donald Trump after Musk spent millions and posted countless pro-Trump messages on his X social-media platform before the November election.

"Tesla's pure AI-based self-driving uses cameras and end-to-end neural networks, and is a critical part of the Cybercab business," Gengaro wrote in a note to clients. "We believe Elon Musk's role in the Trump administration could accelerate regulatory approvals, likely paving the path for [Tesla's] FSD."

Tesla's stock climbed 2% in premarket trading, putting it close to its 21/2-year closing high of $252.56 reached on Nov. 22.

The rally follows a 38.2% surge in November, which marked the stock's best monthly performance since the 40.6% rally in January 2023.

Over the weekend, Ashok Elluswamy, vice president of Tesla's Autopilot/AI Software division, posted on X that Version 13 of "FSD (Supervised)" software, which "upgrades every part of the end-to-end driving network," had started rolling out.

The update was teased by Musk in the post-earning conference call with analysts in October. "Version 13 of FSD is coming out soon," he said, according to an AlphaSense transcript.

"[Tesla] is clearly not just an automaker, as evidenced by its current [market capitalization] surpassing the aggregate value of the top 10 global automakers," Stifel's Gengaro wrote. "While we have confidence in [Tesla's] auto business, the significant value creation potential from its AI-based full self-driving capabilities and Cybercab (Robotaxi) underpin our positive outlook."

He reiterated his buy rating on Tesla's stock while raising his price target by 43%, to $411 from $287. His new target, which implies about 19% upside from Friday's closing price of $345.16, is the highest among the 57 analysts surveyed by FactSet who cover Tesla.

The second-highest stock price target of $400 is that of Wedbush's Dan Ives, who said last week that the AI and autonomous driving opportunity will be worth $1 trillion in market cap for Tesla over time.

Tesla was the seventh-most valuable U.S. company as of Friday's close, with a market cap of $1.11 trillion. That compares with the market caps of automakers General Motors Co. $(GM)$ of $61.13 billion and Ford Motor Co. $(F)$ of $44.23 billion.

Tesla's stock has rallied 38.9% this year through Friday, while the Global X Autonomous and Electric Vehicles ETF DRIV has slipped 4.1% and the S&P 500 index SPX has advanced 26.5%.

-Tomi Kilgore

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December 02, 2024 07:44 ET (12:44 GMT)

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