Tesla’s Stock Faces Major Price Target Cut – But Still Signals a Strong Upside

Posted by OVM
Photo by Charlie Deets

Tesla (TSLA) has long been a volatile stock, reflecting both its disruptive potential and the challenges it faces in an increasingly competitive electric vehicle (EV) market. However, RBC Capital Markets’ recent downgrade of Tesla’s price target from $440 to $320 has sparked renewed debate among investors. While this marks the lowest price target issued by a Tesla bull, it still implies a 39% upside from current levels. The revised outlook is primarily driven by diminished expectations for Tesla’s self-driving software revenue and its robotaxi rollout in China and Europe. With increasing global competition, regulatory scrutiny, and shifting consumer sentiment, how should investors interpret this price adjustment?

RBC’s Price Target Reduction: Key Reasons Behind the Downgrade

On Tuesday, RBC analyst Tom Narayan significantly slashed Tesla’s price target by 27%, citing two critical challenges:

  1. Lower Revenue Projections for Tesla’s Full Self-Driving (FSD) Software
    • RBC now expects Tesla to charge only $50 per month for its FSD subscription, down from a previous estimate of $100 per month.
    • Increasing competition from Mercedes, Aptiv, and BYD—who are offering advanced driver-assist features as standard rather than premium-priced add-ons—is pressuring Tesla’s pricing strategy.
    • This shift challenges Tesla’s long-standing goal of making FSD a major revenue driver.
  2. Fierce Competition in China and Europe’s Robotaxi Markets
    • Tesla’s projected market share in the Chinese and European robotaxi sectors has been cut in half, from 20% to 10%.
    • RBC analysts predict that domestic EV manufacturers will dominate these regions, making it harder for Tesla to establish its presence.
    • With competitors such as BYD aggressively rolling out next-gen technology, Tesla faces a tougher battle than anticipated.

Despite these challenges, Narayan remains optimistic about Tesla’s U.S. market strength, dismissing concerns about declining European and Chinese sales as “overblown.” He believes that Tesla’s dominance in North America could continue to support its stock.

Tesla’s Stock Takes a Hit, But Long-Term Prospects Remain Positive

Following RBC’s report, Tesla’s stock dropped 6.1% on Tuesday, extending its losses to 44.5% for 2025, making it the worst-performing stock in the S&P 500 this year. Investors are understandably cautious, especially as Tesla faces:

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