Tesla Stock Outlook: Can TSLA Stock Climb Back Above $500 Before 2027?

TradingKey - Financial analysts are sharply divided when it comes to making predictions for Tesla. At one time, the company was widely regarded as the leader in the electric vehicle market. However, with demand for Tesla’s vehicles declining and competition from other automakers increasing, many investors are beginning to lose faith in CEO Elon Musk's vision for the company.

After experiencing dramatic declines from near-record highs, investors are left asking, is it reasonable to expect that the stock price of Tesla could regain $500 per share before 2027?

As time goes on, we reach the point where it is less about expectations for Tesla as a mass producer of electric vehicles and more about whether or not Tesla can demonstrate to the investment community that it has transitioned into a major player in the automated intelligence (AI) and robotic sectors.

Tesla Is Now Worth More Than Just Its Cars

Normally, car manufacturers are evaluated by how many vehicles they sell, how much money they make on those sales, and how big their production capacity is. Tesla is valued differently than traditional automakers. Even after experiencing a lot of ups and downs in its stock price this year, TSLA still has a much higher market capitalization (what investors believe the company is worth) compared to the rest of the world's automakers.

What gives? Investors look at Tesla as if it is not just an electric vehicle (EV) manufacturer, but as an innovator in several cutting-edge industries.

The bulk of the Tesla premium is related to the future growth potential associated with:

• Autonomous vehicle technology
• Mobility business (robo-taxis)
• Artificial Intelligence (AI) infrastructure
• Automated humanoid robots
• Expansion of energy storage systems

Putting a value on a company based on only how many cars it builds will result in a much lower valuation than if you put a price tag on it in relation to only how many EVs it builds, but the market assigns a large "future technology" premium to Tesla today.

Why the Robotaxi Narrative Matters So Much

The largest single major dynamic for Tesla's stock may ultimately be the emergence of robotics with the ability to drive themselves.

Elon Musk has consistently maintained that Tesla will derive most of its long-term value from being able to offer large-scale, robotaxi operation. If Tesla is able to successfully establish itself as a business that operates on an ongoing basis from providing software and a mobility platform (as opposed to just selling vehicles), it will dramatically change the earnings profile of the company.

In contrast to traditional auto sales revenue, the revenue generated by robotaxi networks would be substantially greater than that of traditional businesses, due to the continued revenue that will be earned from providing services (transportation) through software (subscription) and artificial intelligence (licensing).

For these reasons, all major developments surrounding the progress of FSD's development, regulatory approvals and tests will dramatically drive TSLA's stock price higher.

To put it simply for those investors who are long TSLA, if Tesla can develop and deploy fully-autonomous drive vehicles at scale; then the valuation of TSLA would likely appear to be extremely conservative compared to the potential for TSLA to grow into a massive company in the future.

The Role of AI Expansion in Moving Tesla Forward as a Company

Tesla is transitioning from being seen simply as an automobile manufacturer to being viewed as an artificial Intelligence company.

Some of the major components Tesla is focused on developing through its continued investment are:

• AI training
• AI chips, including development of supercomputers
• Collection of real-world driving data
• Humanoid robots (Optimus)

Tesla's Dojo supercomputer project, as well as the large amounts of real-world data generated from its globally operating fleet (millions of vehicles), are central to the company’s ongoing success. Tesla bulls claim that, due to the large global fleet of Tesla vehicles already operating and providing real-world driving data to the company, Tesla has one of the largest real-world datasets of AI technology in the world.

As autonomous vehicles become monetized with greater accuracy, the value of these data will continue to increase.

Equally important to the growth of Tesla's value are the speculative but transformative implications of Optimus (Tesla's humanoid robots). Elon Musk has also mentioned that the humanoid robotics business could eventually exceed the revenues of Tesla's automobile business.

If these ambitious goals come to fruition, they will contribute to the ongoing growth of Tesla's stock price over the long term.

What Would It Take for Tesla Stock to Reclaim $500?

For Tesla Stock to hit $500 again, It will likely require several catalysts to be in agreement.

Autonomous Driving Development

The market needs more clarity to support Tesla’s robotaxi proposal.

If they receive regulatory clearances, complete successful pilot testing, and have a meaningful level of being able to use their “Full Self Driving”, this could significantly improve sentiment among investors

Vehicle Margins Have to Encourage Stability

Tesla’s core electric vehicle business is still of significant value.

However, the automotive sector and overall vehicle margins have been affected by the reduction of price and decline in demand this year.

If the sales growth of Tesla’s electric vehicles resumes but profitability stabilises, we think that investors would feel more confident about the underlying fundamentals of the business.

Continued Optimism for AI

Tesla remains extremely sensitive to the overall sentiment for the broader artificial intelligence market.

As long as the market continues to reward companies involved with infrastructure and automation within the artificial intelligence sector, Tesla will likely be able to sustain high price/earnings multiples relative to other traditional automotive manufacturers.

The Largest Risk to TSLA Shares

While the possible future returns of TSLA Stock are highly valued, there is a significant amount of risk as well.

Competition for electric vehicles is continuing to rise on a global basis and from Chinese Manufacturers. Pricing pressures could continue to create margin compression with or without additional deliveries.

Furthermore, the fundamentals behind the robotaxi and humanoid robot future remain largely unknown. As such, there is a high probability of investors having future technology priced in years before they are commercialized.

Finding the right balance can be difficult; almost all of the valuation on TSLA's stock is based on the narrative of innovation, whereas the market is becoming less forgiving of the time taken for execution.

Consequently, elevated interest rates or heightened levels of risk-off sentiment could create further pressure across the entire growth stock market for high-multiple technology stocks.

Implications for Investors

The long-term stock price action of Tesla is going to be determined less by deliveries of vehicles every quarter and much more on the degree to which investments continue to believe in the story being told of how Tesla is transforming itself as a company through artificial intelligence.

Tesla is no longer just competing with Ford or Toyota. Rather, the company is now vying for the attention of investors with leading companies that are involved with artificial intelligence and robotics.

If robotaxi operations, Full Self Driving (FSD), and AI supporting infrastructure develop into scalable businesses then TSLA stock will ultimately return back to all-time highs and potentially reach new all-time highs.

However, if the delay in commercializing autonomous driving does not resolve itself, the market may choose to evaluate TSLA as if it were just another traditional car manufacturer as opposed to a disruptive technology company.

In conclusion, investors need to evaluate if Elon Musk will be able to fulfil the promises he has made regarding Tesla and its product lines and have those promises developed to the point where they can be commercially viable by 2027 for the stock price to return to $500 before 2027.