Investing.com — Tesla continues to be Piper Sandler’s “#1 buy-and-hold idea,” as the company raised its price target for the stock from $315 to $500.

The company’s analysts believe investors are beginning to appreciate Tesla’s (NASDAQ: ) potential in “real-world AI,” prompting portfolio managers to consider upside scenarios more seriously.

In their recent note, Piper Sandler said it has curated more than a dozen Tesla-specific datasets.

Despite uncertainties surrounding near-term financials, particularly vehicle deliveries and automotive gross margins, the long-term outlook is said to remain promising.

“We expect Tesla to deliver 1.96M units in 2025 (vs. 1.79M in 2024), but we expect >100k incremental units from unknown vehicles, and another 70k incremental ones unit from Cybertruck,” said Piper Sandler.

However, they caution that this forecast is uncertain and the potential downside may not be apparent until later updates.

On the gross margin front, Piper Sandler maintains a more positive outlook, expecting strong post-quarter performance as long as Tesla stays on track with new product launches.

Looking ahead, Piper Sandler revised its long-term delivery expectations, now predicting that Tesla will increase to around 4.6 million units annually by 2032.

The focus, they believe, will shift from launching new cars to popularizing full self-driving (FSD) software.

“We are currently modeling a contribution from FSD licensing,” the analysts said, with Tesla’s existing businesses valued at less than $300 per share, including FSD.

For valuation, Piper Sandler is switching to a P/E-based approach, with their $500 target price based on 120x FY26E EPS.

They expect that within a year, investors will get more clarity on Tesla’s product cadence, allowing a study of more ambitious topics such as the effectiveness of FSD and the broader ambitions of AI in Tesla.