Tesla stock below $400, but analysts see upside ahead

Shares of Tesla moved higher early Tuesday as US equities extended gains from the previous session, supported by ongoing developments in the Iran conflict.

The S&P 500 rose about 0.6%, while the Nasdaq Composite gained nearly 0.7%. The Dow Jones Industrial Average added around 250 points, or 0.5%.

At the time of writing, the Tesla stock was up around 0.4% to trade at $397.

Oil prices remained volatile, continuing to influence investor sentiment.

Brent crude climbed about 2% and traded above $100 per barrel, raising concerns about inflation but also creating potential tailwinds for electric vehicle adoption.

Analysts see margin strength and EV demand tailwinds

Stifel maintained a Buy rating on Tesla with a $508 price target, pointing to strong profitability and improving fundamentals.

Analyst Stephen Gengaro said Tesla’s fourth-quarter gross profit of $5.01 billion exceeded expectations and highlighted margins of 20.1%, which reached a two-year high despite tariff pressures and lower fixed cost absorption.

Gengaro emphasised Tesla’s progress in autonomous driving and robotaxi development, noting these areas are critical to long-term valuation.

The analyst also said Tesla now has nearly 1.1 million paid Full Self-Driving customers globally.

While future growth is expected to shift toward subscription-based models — potentially creating short-term margin pressure — it could generate higher-margin recurring revenue over time.

Stifel added that persistently high gasoline prices, if the Iran conflict continues, could support stronger demand for electric vehicles.

Battery investment expands energy business

Tesla is also advancing its energy storage ambitions.

The company has signed an agreement with LG Energy Solution to build a $4.3 billion lithium iron phosphate battery cell manufacturing facility in Lansing, Michigan, with production expected to begin in 2027.

The facility will produce LFP battery cells, a lower-cost alternative to traditional cobalt-based batteries.

According to the US government, the domestically produced cells will be used to power Tesla’s Megapack 3 systems manufactured in Houston, Texas.

Megapacks are large-scale battery systems designed for utilities to store energy and improve grid efficiency, particularly in conjunction with renewable power sources.

Competition intensifies in autonomous driving

Tesla continues to expand its robotaxi operations, which are central to its long-term growth strategy.

The service is currently active in San Francisco Bay Area and Austin, Texas, with plans to expand to additional cities, including Dallas, Houston, Phoenix, Miami, Orlando, Tampa and Las Vegas in the first half of 2026.

Wall Street remains focused on the potential of Tesla’s autonomous driving business.

Morgan Stanley estimates that Tesla’s self-driving technology could be worth about $270 per share, or roughly $1.2 trillion in total.

At the same time, competition in autonomous driving is increasing.

Nvidia is expanding its presence in the sector through its DRIVE platform, which integrates artificial intelligence into vehicles for autonomous capabilities.

Uber Technologies has announced plans to deploy DRIVE-enabled robotaxis across 28 global markets by 2028.

Several automakers, including BYD, Hyundai Motor, and Nissan, have also said they will adopt Nvidia’s platform for their autonomous driving programs.

These developments could intensify competition for Tesla’s Full Self-Driving system and its planned Cybercab robotaxi offering.

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