Bank of America (BofA) raised its price target on Tesla (NASDAQ:TSLA) to $471 from $341, while reiterating a Neutral rating, describing the electric vehicle maker as the clear frontrunner in the emerging field of “physical AI” but cautioning that its current valuation appears lofty.
The revised target is derived from a sum-of-the-parts (SOTP) analysis that attributes about 45% of Tesla’s total value to its robotaxi segment, 19% to the Optimus humanoid robot project, 17% to Full Self-Driving (FSD), 12% to the core automotive business, and 6% to energy generation and storage, according to the analysts.
The team, led by Federico Merendi, said the higher valuation reflects “a lower cost of equity capital, better Robotaxi progress, and a higher valuation for Optimus to account for the potential entrance into international markets.”
BofA adjusted its financial forecasts to include stronger energy division margins, more affordable Model 3/Y variants, and early contributions from the Robotaxi business. However, the analysts also raised their projections for operating costs to reflect Tesla’s continued investments in growth.
They now expect operating expenses to reach $13.2 billion in 2026, up 24% from previous estimates.
“We continue to see TSLA as the company with the largest advantage in terms of autonomous driving initiatives and physical AI applications currently in the marketplace. However, we acknowledge that there are challenges in the near term and the current valuation is stretched,” the analysts wrote.
Tesla’s third-quarter earnings highlighted revenue of $28.1 billion, a 12% year-over-year increase that topped Wall Street expectations, supported by record deliveries of 497,099 vehicles.
The company’s automotive margins declined to 17%, pressured by rising costs and tariffs, while its energy segment performed strongly, with gross margins of 31.4%.
Operating expenses climbed 44% year-on-year, driven by a 57% surge in AI and R&D spending as Tesla continues to expand its technology footprint.
Analysts cautioned that short-term challenges remain for the company’s North American automotive business following the expiration of Inflation Reduction Act incentives, echoing CEO Elon Musk’s warning of “a few rough quarters.”
Still, BofA’s team remains upbeat on Tesla’s prospects in energy and autonomous mobility, noting that the company’s service area in Austin has tripled and that Robotaxi operations could launch in as many as ten metropolitan areas before the end of the year.
“Tesla’s vision-based approach has the potential to allow for much quicker scaling of Robotaxi vs. competitors,” analysts said.