• by Sarah Mahoney  @mahoney_sarah, January 7, 2025

Bank of America downgraded Tesla to a “hold,” several days after the world’s most valuable car company reported its first annual sales drop in over a dozen years.

While analyst John Murphy writes that investors are generally more positive about the company’s future growth, most of those expectations are already reflected in the stock price. That includes forecasts for Robotaxis, due out later this year. Bank of America estimates that expectations for how that division will perform currently account for about 50% of Tesla's value.

There’s a lot that can go wrong before then. “Business execution risk is high,” says Murphy in Barron’s. “Tesla still has to make its autonomous-driving software—Full Self Driving, or FSD—better than humans, something CEO Elon Musk believes will happen early this year.”

It won’t help that the National Highway Traffic Safety Administration just opened a probe into 2.6 million Tesla vehicles in the U.S.,  reports Reuters, over reports of crashes involving “Actually Smart Summon,” a feature that allows users to move their cars remotely. The latest investigation follows the one NHTSA opened in October, focusing on 2.4 million Teslas with FSD after four reported collisions, including a fatal 2023 crash.

Tesla plans to launch its level 3 autonomous driving software in California and Texas, “a key step toward the company's goal of a Robotaxi service,” writes Seth Goldstein, who follows the company for Morningstar. “We expect the level 3 software will launch in 2025 but will likely require further improvements before Robotaxis can be feasible. We forecast the Robotaxi launch will be delayed past management's 2026 timeline.”

Another question mark at both Bank of America and Morningstar is how smoothly Tesla will be able to execute plans for a lower-priced vehicle, which is supposed to enter production by midyear.

“Management guided to deliveries growth of 20% to 30% in 2025, but we see growth well below this range,” writes Goldstein. “We expect production of the new vehicle will take longer to ramp up versus the implied current timeline.”