Tesla sell-off is overdone, this bull says

Tesla (TSLA) stock has been under pressure this year, but one analyst is telling investors to take a deep breath.

Despite mounting headwinds and technical signals flashing red, RBC Capital Markets analyst Tom Narayan said the recent Tesla sell-off has gone too far. In a new note to clients, Narayan reiterated his Outperform rating and raised his price target to $319, up from $307. That implies about 7% upside from current levels.

“We believe there is strong demand for Tesla products even in the face of more EV competition,” Narayan wrote. “Tesla’s lead, profits, cash generation, and currency are a major advantage that helps it to fund growth.”

RBC values Tesla’s core car business at 1x sales but gives premium weight to its long-term plays like Megapack energy storage systems, autonomous driving, and AI. The firm applies a 15x multiple to 2040 estimated EBITDA for Megapacks and a 10x revenue multiple to Tesla’s future robotaxi and humanoid robot operations.

The long-term picture, Narayan argued, justifies holding through the current rough patch. But not everyone is buying it.

Tesla’s stock has dropped over 20% year over year. According to Adam Turnquist, LPL Financial’s chief technical strategist, short-term technical indicators suggest further dips for the stock. The stock is also underperforming compared to “Magnificent Seven” peers like Nvidia (NVDA) and Meta (META), which are up 16% and 20%, respectively.

Read more: How to avoid the sticker shock on Tesla car insurance

Tesla’s recent financials haven’t helped sentiment. Tesla reported in Q2 that it sold 384,122 cars, a 13.5% drop year over year. Declining EV demand and CEO Elon Musk’s political foray have led to boycotts and protests, making some analysts skeptical of a near-term rebound for the company.

Even so, Narayan sees opportunity. RBC projects Tesla’s revenue will rebound to $111 billion by 2026, up from an estimated $93.5 billion this year. Adjusted earnings per share (EPS) are expected to rise in that period from $1.99 in 2025 to $2.99 in 2026. Those gains would be fueled by expanding production, new product launches, and higher-margin growth from non-automotive businesses.

Narayan also pointed to a potential boost from Tesla’s robotaxi, which could reinvigorate investor enthusiasm around its full self-driving ambitions. “Tesla is EV’s poster child,” RBC argued. Piper Sandler analysts recently called the company the “most transformative company in autos,” noting that in the long run, it “will likely win.”

Still, RBC flags several risks, including volatile earnings, cost inflation, and supply chain hiccups. The firm also notes that Tesla’s business is “cyclical” and vulnerable to broader economic slowdowns, especially if rising interest rates or geopolitical shocks weigh on consumer spending.

And, of course, there’s Elon Musk. The Tesla CEO has drawn fresh scrutiny from posting political and divisive comments online, raising questions about the company’s governance and long-term brand strength. That unpredictability continues to be a wild card for investors. For now, RBC is holding firm.

“Company and quarterly results may be lumpy due to timing and a variety of manufacturing issues, which could cause stock price volatility,” Narayan noted. However, “Tesla is a growth company.”

Francisco Velasquez is a reporter for Yahoo Finance. He can be reached on LinkedIn and X.

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