Bank of America sounds alarm on Tesla’s problem

Do you want to see a flying car? 

Tesla (TSLA) may soon show one.

Tesla CEO Elon Musk recently hinted that the company might unveil a flying car before the end of 2025, according to The Information.

Musk said on "The Joe Rogan Experience" podcast that the company was close to demonstrating a prototype, but declined to provide any details.

"Whether it's good or bad, it will be unforgettable," Musk said. "My friend Peter Thiel, you know, once reflected that the future was supposed to have flying cars, but we don't have flying cars."

With Tesla pushing ambitious new projects, the stock price has been rising as well. The stock is up 13% year to date and is trading close to its record high, closing at $465.56 on Oct. 31.

Tesla has one of the largest retail investor bases in the market. Many of those are now asking the same question: How much room does the stock have left to grow?

Tesla’s Q3: Profits fell short, despite record sales

Tesla reported record third-quarter revenue of $28.1 billion on Oct. 22, which beat Wall Street estimates. This was driven by rising EV sales as U.S. buyers rushed to claim a tax credit ahead of its September expiration. 

Despite the revenue boost, Tesla’s net income fell to about $1.4 billion, a decline of 37% from a year earlier, under pressure from higher tariffs, research costs, and a drop in regulatory credit income. 

Related: Elon Musk's top 3 shocking quotes from Telsa Q3 earnings call

Free cash flow, however, soared to nearly $4 billion, a record for the company.

That gives Tesla far more flexibility to fund growth areas such as AI, robotics, and autonomous mobility.

Bank of America warns of Tesla’s valuation

On Oct. 29, Bank of America analysts Federico Merendi and William Healey raised the firm’s price target for Tesla to $471 from $341. 

“Our revision is driven by a lower cost of equity capital, better Robotaxi progress, and a higher valuation for Optimus to account for the potential entrance into international markets,” the analysts wrote in a research note.

Still, the analyst warns that while Tesla remains a leader in autonomous driving and physical AI, the valuation is "stretched."

"There are challenges in the near term and the current valuation is stretched. Therefore, we reiterate our neutral rating," the analysts wrote.

In the near term, Bank of America said Tesla will face challenges in the auto segment in North America, given that IRA incentives have expired. This aligns with Musk's July comments in the second quarter of 2025: "We probably could have a few rough quarters." 

But the analysts still believe that Tesla's energy and Robotaxi segments are "promising."

Cathie Wood says Tesla’s stock could hit $2,600

Ark Investment's Cathie Wood has been one of Tesla’s most vocal believers for nearly a decade. Her firm first bought Tesla shares in 2016 and continued adding through years of volatility.

In March 2025, Wood predicted Tesla’s stock would reach $2,600 in five years, which is more than five times higher than where it trades now.

Related: Cathie Wood sold $21.4 million of surging AI stocks

"If I could only invest in one stock, it would be Tesla," Wood said in a podcast "The Diary Of A CEO" in June.

"Because, think about it. It is a convergence among three of our major platforms. So, robots, energy storage, AI," Wood said.

"And it's not stopping with robotaxis, there's a story beyond that with humanoid robots, and our $2,600 number has nothing for humanoid robots," she added.

Tesla has long been Wood’s top holding, now accounting for 12.3% of the flagship Ark Innovation ETF (ARKK).

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