Tesla's Price Targets Are Coming Down, but Many Analysts Still See Plenty of Upside

Key Points

Analysts have been downgrading the stock in recent months, but some still believe it could rise to well over $500.

The stock's high valuation suggests that many investors are pricing in a lot of future growth.

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Analyst expectations can change over time, and while they aren't perfect or guaranteed predictors of where a stock might go, they can be helpful in gauging the level of bullishness around a stock. If the market sentiment is strong around a business and its results are encouraging, analysts will likely raise their price targets. And when the prospects are less than exciting, you can expect to see some downgrades.

Tesla (NASDAQ: TSLA) is a stock that's been struggling of late. It's down 11% this year, and concerns are rising about its ability to compete in an increasingly more competitive electric vehicle (EV) market. That has led many analysts to lower their price targets for the stock recently. But even amid those downgrades, some analysts see much more room for the stock to rise. Could Tesla be a good stock to buy today?

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Many analysts still see more than 20% upside for the stock

Opinions on Tesla vary wildly. And a lot can come down to whether you view this as mainly an EV stock or an artificial intelligence (AI) company that still has much more growth ahead. The EV side of the business hasn't been looking all that great recently, with Tesla's margins and profits declining last year.

Most analysts who have been changing their price targets in recent months on Tesla have been lowering them. The consensus analyst price target is now just under $399, suggesting Tesla's stock, which closed at $400.62 on Friday, has run out of room to rise in the short term. But multiple analysts see the stock rising by more than 20%, with some predicting it could reach more than $500.

Is Tesla's stock a good deal right now?

Although it's been falling in value this year, Tesla's stock is by no means a cheap buy; its price-to-earnings multiple is nearly 370, which means you really have to love the business and believe in CEO Elon Musk and that this will be a massive AI company in the future, for the stock to be a good buy at its current price.

The risk with Tesla is that if investor sentiment sours, the stock could quickly go into a freefall. You only have to go back to 2022 to get a reminder of how bad things can get. That year, the stock plunged 65%.

There can be considerable upside for the stock if the business delivers on lofty AI goals, including selling robots in the near future, but that would be a best-case scenario. If you don't have a high risk tolerance, you may want to consider safer growth stocks instead of Tesla.

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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.