If You Buy Tesla Today, Here's the Bull Case for the Next 3 Years

Key Points

• Wall Street expects significant gross profit growth from robotaxis by 2029.

• Robotaxi developments are central to Tesla’s bullish investment thesis, and understanding the case for buying the stock.

It’s no secret that Tesla (NASDAQ: TSLA) stock isn’t valued based on its current earnings, but rather on what it could become as its future robotaxi and robotics businesses grow. In that vein, here’s a look at how the market and, in particular, Wall Street analysts are assessing Tesla’s growth prospects over the next few years and the growing importance of robotaxis to the outlook.

Robotaxis aren’t the means to the end

It’s important to understand that the robotaxi isn’t an appendage or an optional extra to Tesla’s electric vehicle (EV) business. Instead, it’s the natural direction where the industry is headed. There’s a reason Tesla’s rivals spent billions developing robotaxis, and why Alphabet is effectively subsidizing its loss-making subsidiary, Waymo, to gain an early foothold in the market.

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Image source: Tesla.

The implicit understanding is that the cost-per-mile advantage of EVs will be even greater if they are used autonomously, resulting in an ultra-low cost per mile — Tesla CEO Elon Musk has talked of an operational cost per mile as low as $0.20 — which will fundamentally change the transportation market.

Tesla’s current EV market share, its potentially low cost per mile, cost of vehicle (Cybercab, the dedicated robotaxi in production, is expected to sell for less than $30,000), and billions of miles driven on supervised full-self driving (FSD) software are all big advantages for investors. Analysts hope and expect these factors play out in the growth of robotaxi revenue and profits.

The bull case for Tesla

These positive expectations are reflected in the Wall Street Analyst consensus, according to data from S&P Global Market Intelligence (Visible Alpha). The consensus calls for Tesla’s gross profit to increase from $17.1 billion in 2025 to $29.1 billion in 2028, a compound annual growth rate of 19.4%.

However, gross profit from robotaxis is expected to hit just over $2 billion in 2028. As such, Wall Street analysts are factoring in that 6.9% of Tesla’s 2028 gross profit will come from robotaxis. That may not sound like much, but consider that it’s potentially a much higher gross-profit-margin business than Tesla’s automotive (high teens margins) and energy storage and generation (high 20% margins). In addition, it’s likely to scale significantly in the coming years as robotaxi usage grows.

As such, the consensus calls for $12 billion in gross profit from robotaxis in 2029, accounting for almost 29% of the company’s $41.7 billion in gross profit.

Image source: Getty Images.

What it means for Tesla investors

These are just numbers written in cyberink stored on a server, and there’s no guarantee any of the forecasts will come to fruition, with significant downside potential for the stock if Tesla’s robotaxi rollout disappoints.

However, they do help explain just why Tesla investors are willing to look past the current valuation of 200 times 2025 earnings expectations. They also serve to illustrate how important robotaxi developments are for the stock, and the medium-term bullish case for the stock is largely based on them.

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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Tesla. The Motley Fool has a disclosure policy.