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AI and robotics are the keys that will drive Tesla to a $1 trillion valuation, Wedbush says

Jennifer Sor   

AI and robotics are the keys that will drive Tesla to a $1 trillion valuation, Wedbush says
  • Tesla investors reapproving Musk's pay package puts the company on back on track, Wedbush said.
  • The firm reiterated its $275 price target and suggested Tesla was set to hit a $1 trillion valuation.

Tesla is on track to notch a $1 trillion valuation, and a big surge in the electric car maker's stock could be coming as soon as it unveils key artificial intelligence and robotics initiatives this year, according to Wedbush Securities.

The financial services firm reiterated its "outperform" rating and its $275 price target for the stock, implying another 50% upside for Tesla shares. Analysts said that's largely due to Tesla shareholders recently re-approving Elon Musk's $56 billion pay package, which has opened the door for Musk to recommit to the company's AI and robotics projects.

"Now with this comp package done we would expect the Tesla Board to get Musk to an incentive of driven 25% ownership of Tesla that should resolve this AI threat saga the last few months," analysts said in a note on Friday, referring to Musk's suggestion that he could take AI projects outside of Tesla unless he had at least 25% ownership of the company.

"We would expect once Tesla officially gets through the final steps in this Twilight Zone Delaware legal spider web that the Board will have a new incentive-driven AI comp package for Musk that gets him to 25% ownership while keeping all AI initiatives under the hood of Tesla," the note added.

Tesla looks poised to unveil some of its key AI and robotics projects soon, such as its full self-driving software and its Model 2.5. The company's robotaxi day — where it is anticipated to roll its its full self-driving taxi — could be a "key historical moment" and a huge bullish catalyst for a stock, Wedbush said.

Importantly, key headwinds for the stock look to be subsiding. Demand for Teslas is starting to heat back up in China, despite rising competition from rival EV makers.

"The Street is not expecting any major fireworks for the June quarter but the seeds for a demand turnaround are starting to take place in our view and now it's about execution for Musk and Tesla heading into 2H and 2025. The stock has been through a nightmare after a Cinderella ride these last few years, and now it's time for Musk to turn this around," analysts said, adding that they saw a potential rebound for the stock in the second half of the year.

Tesla stock is down 27% this year. The company is still battling sagging demand for its EVs, which led to deliveries coming in far below expectations in the first quarter.

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