Reveal
Potential

Tesla stock has faced challenges since its peak in December, but some Wall Street analysts still see potential opportunities by 2025.

 

The electric automaker's stock is experiencing a correction, declining about 18% from its all-time high closing price of $479.86 on December 17. This sell-off, initially triggered by a broader market downturn, intensified last week after Tesla reported missing annual delivery targets for the first time.

 

The stock further declined by 4% on Tuesday, trading around $395.30 per share.

 

Despite the early 2025 stock weakness, some analysts maintain that the stock has further upside potential this year.

 

Artificial intelligence could be a bullish factor for the stock, according to Dan Ives of Wedbush Securities, who forecasts that companies will spend $2 trillion on AI investments over the next three years.

 

"We've continuously discussed the AI Revolution over the past few years as we believe it represents the most significant tech transformation in over four decades," noted Ives. "Now it's time for the broader software sector to join the AI movement as use cases are rapidly increasing."

 

Here's what analysts are saying about Tesla stock's recent challenges and why the automaker's shares might still experience significant gains in 2025.

 

Consider the Decline a Buying Opportunity: Wedbush Securities

 

According to Wedbush, Tesla's recent stock decline presents a buying opportunity for investors. The firm cites Tesla's "respectable" sales performance from the previous year, highlighting that the company delivered roughly 495,600 vehicles, just slightly below the projected 504,800 units.

 

Tesla is expected to release new models this year, potentially boosting its stock. Analysts reference the low-cost Tesla model Musk has been hinting at for years.

 

"We believe Tesla remains the market's most undervalued AI investment," analysts claimed, expressing "high confidence" that Tesla could increase its delivery growth by 20%-30%.

 

"Tesla's focus for 2025 is on accelerated delivery growth and full self-driving penetration, with the autonomous vision as Musk & Co.'s ultimate goal. We are strong buyers during any sell-off today due to weaker 4Q delivery numbers."

 

The firm reaffirmed its "outperform" rating on the stock and its $515 price target, suggesting a 31% upside from current levels.

 

Stock Appears Inexpensive: Stifel

 

Tesla's stock seems appealing at its current price, considering the company is more than just an automotive entity, according to Stifel analyst Stephen Gengaro.

 

"If you're purchasing the stock solely because they sell EVs, it seems overvalued. However, when considering full self-driving initiatives and how it could enhance the Cybercab business over time, it becomes a substantial value driver for the stock in the medium- to long-term," Gengaro commented in a conversation with Yahoo! Finance on Monday.

 

Musk's increasing interaction with president-elect Trump in recent months is also viewed as positive. It positions him to potentially impact full self-driving technology regulation, as Gengaro pointed out.

 

Furthermore, Tesla might benefit if Trump fulfills his plans to impose steep tariffs on U.S. imports from other nations. These tariffs could lessen competition from Tesla's U.S. rivals, another advantage, according to Gengaro.

 

"Musk is clearly involved in the conversation about accelerating regulation for FSD, opening up various growth prospects for the company over time."

 

In a Monday note, the firm raised its price target for Tesla shares to $492, indicating a 25% upside from current levels.

 

Full Self-Driving Could Approach a Valuation of Half a Trillion Dollars: BofA

 

Bank of America analysts downgraded their Tesla stock rating to neutral in a Tuesday note but increased their price target to $490 per share, suggesting approximately a 25% upside from current levels.

 

They estimated that Tesla's full self-driving technology could have a worth of about $480 billion. Meanwhile, the robotaxi segment might be valued at approximately $420 billion within the US and over $800 billion in global markets, the bank projected.

 

"We tested FSD during our visit to Tesla's gigafactory in Austin, TX in December, and we were impressed by its capabilities," analysts noted, forecasting that by the end of the decade, 23 million vehicles could be equipped with full self-driving software. "FSD is poised to deliver significantly higher margins compared to Tesla's primary auto business and could generate billions in EBIT annually."

 

Additionally, Tesla has several positive prospects in 2025, including possibly launching the robotaxi business and potentially increasing production of Optimus, its humanoid robot, according to the bank.

 

The analysts acknowledged that long-term growth drivers support their price target, although they conceded that there is considerable execution risk.

 

Strength in Energy Storage: Morgan Stanley

 

Morgan Stanley suggested that Tesla's minor delivery shortfall might be insignificant, considering newer facets of its business that will fuel future growth. Analysts highlighted the anticipated lower-priced vehicle model, along with its energy storage business.

 

Energy storage deployments exceeded expectations by roughly 15% in the fourth quarter, while energy storage growth rose about 113% over the 2024 fiscal year, the analysts pointed out.

 

"In our opinion, the shortfall reflects a relatively dated product and greater availability of more affordable competition internationally, prior to the anticipated introduction of the more affordable model (Juniper) in early/mid-2025, offsetting pre-buying and promotional efforts," the analysts wrote.

The new year is just beginning, yet macroeconomic uncertainty is already looming over investors, as Federal Reserve officials express concerns about inflation and its effect on the path of interest rate cuts.

 

During uncertain times like these, investors can boost their portfolio returns by including stocks with strong financial foundations and long-term growth prospects. The investment strategies of top Wall Street analysts can guide investors in selecting the right stocks, as these professionals rely on a deep understanding of the macroeconomic conditions and specific company factors for their analysis.

 

Here are three stocks preferred by the top analysts in the field, according to TipRanks, a platform that evaluates analysts based on their performance.

 

We'll begin with Uber Technologies (UBER), a company known for its ride-sharing and food delivery services. Uber exceeded expectations with its revenue and earnings for the third quarter of 2024, although its gross bookings were below expectations.

 

Recently, Mizuho analyst James Lee reaffirmed a buy rating on Uber Technologies shares with a price target of $90. Lee views 2025 as a year of investment for Uber. Although these investments could affect the company's earnings before interest, taxes, depreciation, and amortization in the short term, they are anticipated to drive long-term growth.

 

Based on his analysis, Lee expects Uber's growth investments to lead to a compound annual growth rate of 16% in core gross bookings from FY23 to FY26, aligning with the company's target of mid- to high-teens growth projected during their analyst day. Lee is confident that Uber's EBITDA growth is on track with the forecasted high-30s to 40% compound annual growth rate set during the analyst day. "Despite focusing on growth investments, economies of scale and enhanced efficiency should mitigate margin risks," said Lee.

 

Additionally, Lee believes that concerns about the growth of Uber's Mobility business are exaggerated. He anticipates high-teens gross bookings growth (in forex-neutral terms) in FY25, with the rate of deceleration slowing compared to the latter half of 2024.

 

Moreover, Lee projects that gross bookings for Uber's Delivery segment will remain in the mid-teens in FY25. This increase is expected to be driven by the rising adoption of new verticals while maintaining its market share in food delivery. The analyst also noted that Mizuho's research indicates order frequency has reached a new all-time high. The research further shows robust adoption of grocery delivery in the U.S., Canada, and Mexico, along with strong user penetration.

 

Lee is ranked No. 324 among over 9,200 analysts tracked by TipRanks. His ratings have been successful 60% of the time, providing an average return of 12.9%. View Uber Technologies Stock Charts on TipRanks.

 

Next, we examine Datadog (DDOG), a company that offers cloud monitoring and security solutions. In November, Datadog reported results for the third quarter of 2024 that exceeded expectations.

 

On January 6, Monness analyst Brian White reiterated a buy rating on Datadog stock with a price target of $155. White believes the company has a balanced approach toward the trend of generative artificial intelligence, "avoiding the exaggerated claims made by many in the software industry." He noted that Datadog performed well compared to its peers in a difficult software landscape in 2024, but acknowledged it lagged behind other stocks in Monness' coverage.

 

Nevertheless, White anticipates that both Datadog and the broader industry will begin to experience incremental growth over the next 12 to 18 months due to the long-term boom in generative AI. Highlighting Datadog's strong performance compared to peers and its transparency regarding its progress in generative AI, White pointed out that AI-native customers comprised more than 6% of the company's annual recurring revenue (ARR) in Q3 2024, an increase from over 4% in Q2 2024 and 2.5% in Q3 2023.

 

White also highlighted some of Datadog's AI offerings, such as LLM Observability and its generative AI assistant, Bits AI. Overall, the analyst is optimistic about Datadog and believes the stock warrants a premium valuation compared to traditional software vendors due to its cloud-native platform, rapid growth, and significant secular trends in the observability field, as well as its new growth opportunities driven by generative AI.

 

White is ranked No. 33 among over 9,200 analysts tracked by TipRanks. His ratings have been successful 69% of the time, yielding an average return of 20%. View Datadog Ownership Structure on TipRanks.

 

Our third stock pick this week is Nvidia (NVDA), a semiconductor powerhouse. The company is regarded as one of the primary beneficiaries of the generative AI surge and is witnessing strong demand for its advanced GPUs (graphics processing units), critical for building and running AI models.

 

Following a fireside chat with Nvidia's CFO, Colette Kress, JPMorgan analyst Harlan Sur reaffirmed his buy rating on Nvidia stock with a price target of $170. Sur emphasized the CFO's confidence in maintaining the production ramp-up of the company's Blackwell platform despite supply chain challenges, thanks to effective execution.

 

Additionally, the company anticipates continued strong spending in the data center space throughout 2025, bolstered by the Blackwell ramp-up and widespread demand. Sur noted that management envisions significant revenue growth opportunities as the company captures a larger portion of the $1 trillion-worth data center infrastructure installed base.

 

Sur added that Nvidia expects to capitalize on the shift to accelerated computing and the growing demand for AI solutions. Management believes the company holds a competitive edge over ASIC (application-specific integrated circuit) solutions due to several advantages, including ease of adoption and comprehensive system solutions.

 

Agreeing with this perspective, Sur stated, "We believe that enterprise, vertical markets, and government customers will continue to favor Nvidia-based solutions."

 

Among other key insights, Sur highlighted the launch of next-generation gaming products and opportunities to expand beyond high-end gaming into markets such as AI PCs.

 

Sur is ranked No. 35 among over 9,200 analysts tracked by TipRanks. His ratings have been successful 67% of the time, providing an average return of 26.9%. View Nvidia Hedge Funds Activity on TipRanks.

Bond yields are climbing to levels unseen in over a year, fueled by worries that President-elect Donald Trump's extensive tariff strategy might trigger a resurgence in inflation.

 

This, in combination with solid economic indicators that don't seem likely to require further aggressive interest rate reductions, has yields on a steep upward trajectory that could impact everyday Americans.

 

While some on Wall Street have issued warnings about how rising bond yields could affect stock markets, the potential challenges extend far beyond that.

 

Outlined below are four areas consumers should monitor for signs of difficulty following the 10-year US Treasury yield's increase of over 100 basis points since mid-September, as it nears the significant 5% mark.

 

Consumer retirement portfolios are confronting a dual challenge as interest rates escalate, resembling what occurred during the bear equity market of 2022.

 

Higher interest rates coincide with declining bond prices for those with fixed-income investments, often resulting in negative returns.

 

In 2022, when the 10-year US Treasury yield more than doubled to around 4%, the Bloomberg aggregate bond index dropped 13%. Increased bond yields also exert pressure on stock valuations, with the S&P 500 falling nearly 20%.

 

Since the 10-year US Treasury yield began increasing in September, that Bloomberg index has decreased nearly 6%, once more adversely affecting consumer retirement assets. This is especially significant for those nearing retirement or already retired, as they typically maintain a larger portion in fixed-income instruments.

 

Meanwhile, the S&P 500 has fallen about 4% since mid-December, when investor unease about surging bond yields started to emerge.

 

Perhaps the most noticeable effect of rising bond yields is the increase in mortgage rates.

 

They were anticipated to decline after the Federal Reserve began reducing interest rates in September, but they have instead increased sharply.

 

This has raised the borrowing costs for potential homebuyers and reduced overall affordability.

 

Based on Freddie Mac data, the average 30-year fixed mortgage rate has climbed nearly 1 percentage point to approximately 7% since September.

 

"Mortgage rates have risen quite significantly," Greg McBride, the chief financial analyst at Bankrate, told Business Insider. He mentioned that a large proportion of the pain arising from higher bond yields is concentrated in fixed mortgage rates.

 

For consumers aiming to purchase a home at the US median sales price of around $420,000, the nearly 1-percentage-point increase in a 30-year fixed mortgage translates to a rise of more than $200 in monthly mortgage payments, equating to about $2,500 per year.

 

Rising interest rates also have an immediate impact on homeowners with adjustable-rate mortgages, as their monthly payments reset to align with the higher interest rates.

 

Even renters might not be exempt, as landlords facing increased financing costs might transfer those costs to their tenants during the next lease agreement.

 

McBride pointed out that auto loan interest rates are more closely associated with movements in the five-year US Treasury yield, which has roughly mirrored the 10-year note's increase of 100 basis points since September.

 

According to data from the St. Louis Federal Reserve, since interest rates began to rise in 2022, consumer auto loan rates for a five-year loan have almost doubled to 8.4% as of August.

 

Consumers can lower their monthly auto loan payment by opting for a longer repayment period, such as the increasingly popular six-year loan. However, this does not reduce the total amount of interest paid on the car over the loan's duration; it actually increases it.

 

Higher bond yields can also push up interest rates on consumer debt, such as personal loans and credit card balances.

 

For credit cards, since the debt is unsecured, it is variable and closely linked to changes in the prime rate, which is based on the federal funds rate.

 

"Even though the Fed lowered interest rates several times in 2024, average credit card interest rates reached record highs," Sara Rathner, a credit card expert at NerdWallet, told BI. "In simple terms, this makes it more costly to have credit card debt."

 

The average credit card interest rate has jumped from about 15% at the start of 2022 to almost 22%, according to information from the St. Louis Federal Reserve.

 

This 7-percentage-point increase will significantly raise interest expenses for consumers if they carry a credit card balance from month to month and do not pay it off fully.

 

A recent survey by NerdWallet found that US households with revolving credit card balances were carrying an average of nearly $10,000 in debt.

 

"If you only make the minimum payment, it could take you over two decades to pay that off," Rathner said, "and with interest, you'll pay triple the original amount that you charged."

 

The stock market has experienced a challenging week, and it might also be facing a difficult year in 2025.

 

The market is on track for its worst week since March 2023 after the Federal Reserve projected a cautious outlook regarding interest rate reductions in 2025. However, examining the market's internal dynamics, it is apparent that damage was inflicted well before the Fed's meeting on Wednesday—and this is a historic indicator of challenging times ahead.

 

The number of declining stocks in the S&P 500 surpassed advancing stocks for 14 consecutive days as of Thursday.

 

The advancing/declining data helps to assess underlying participation in market movements, and the recent weakness indicates that even though the S&P 500 is only down 4% from its record high, damage exists beneath the surface of the benchmark index.

 

This is demonstrated by the equal-weighted S&P 500 index being down 7% from its record high.

 

According to Ed Clissold, chief US strategist at NDR, the S&P 500's 14-day losing streak in its advance-decline line is the worst since October 15, 1978.

 

Clissold noted that 10-day losing streaks or longer in advancing stocks relative to declining stocks can signal ominous prospects for future stock market returns.

 

Although this situation has only been triggered six times since 1972, it demonstrates lackluster forward returns for the S&P 500. The index has shown an average six-month forward return of 0.1% following these 10-day breadth losing streaks, compared to the typical 4.5% average gain observed during all periods.

 

"Studies with only six cases hardly constitute a strategy. But market tops have to originate somewhere, and many commence with breadth divergences, or widely followed averages posting gains with minimal stock participation," Clissold said.

 

Perhaps more indicative for the stock market is whether it can stage a recovery as it approaches one of the most bullish seasonal periods of the year: the Santa Claus trading window.

 

If it cannot, that would be telling, as per Clissold.

 

"A failure to see a Santa Claus Rally would be worrisome not only from a seasonal standpoint, but it would permit breadth divergences to intensify," the strategist mentioned.

 

Additionally concerning to Clissold is investor sentiment, which has exhibited signs of extreme optimism since September. According to the research firm's internal crowd sentiment measure, it is in the seventh-longest stretch in the zone of excessive optimism, based on data since 1995.

 

"Several surveys have reached potentially unsustainable levels," Clissold advised, cautioning that any sentiment reversal could serve as a warning signal for future market returns.

 

Ultimately, sustained stock market weakness, particularly in the internals, would lead Clissold to suggest that 2025 might not be as easy as 2024 for investors.

 

"If the stock market cannot address recent breadth divergences in the coming weeks, it would indicate our concerns about a more challenging 2025 could become a reality," the strategist concluded.