• Tesla (TSLA) shares fell about 4% in premarket trading despite an adjusted earnings beat and positive free cash flow.
  • CLSA upgraded the stock to Hold from Underperform, while several firms raised price targets, but the range of $360 to $485 underscores deep disagreement over valuation.
  • Operating income plunged 56% and revenue was flat, highlighting the tension between near-term cash preservation and long-term bets on robotaxis and AI.

Mixed Signals from Wall Street

Tesla’s third-quarter results have prompted a flurry of analyst adjustments, but the response is far from a unanimous vote of confidence. While adjusted earnings per share of $0.48 beat the LSEG (LSEG.L) consensus of $0.43, it still marked a decline from $0.50 a year earlier. Revenue came in at $28.05 billion, essentially flat year-over-year, and operating income tumbled 56% to $718 million. Free cash flow turned positive at $1.53 billion after a negative second quarter, but that was down 62% from the prior-year period.

The stock was down about 4% in premarket trading, according to CNBC’s 7:38 a.m. report, as investors weighed the earnings beat against weakening profitability. The mixed reaction was reflected in analyst moves: CLSA’s Christopher Richter upgraded Tesla to Hold from Underperform and raised his price target to $400 from $310, citing improved cash flow and potential sentiment around a Tesla–SpaceX (SPCX) merger. But Richter stopped short of a Buy rating, signaling lingering skepticism.

Other analysts were more bullish on price but not necessarily on ratings. Piper Sandler (PIPR)’s Alexander Potter lifted his target to $475 from $450 while maintaining an Overweight rating; Mizuho (MFG)’s Vijay Rakesh increased his to $460 from $450 with an Outperform; Canaccord (CF.TO)’s George Gianarikas raised his to $442 from $410, pointing to higher delivery assumptions and improved energy-storage margins. Morgan Stanley (MS)’s Andrew Percoco took his target to $410 from $400, reflecting greater confidence in robotaxi fleet projections through 2027.

Yet the divergence remains stark. Goldman Sachs (GS)’ Mark Delaney kept a Neutral rating and a $360 target, arguing that spending, competition, and an already-full valuation constrain the investment case. The $360–$485 range in price targets represents materially different assumptions about Tesla’s future businesses, not a consensus that current profits justify a higher share price.

Operational Crosscurrents

Tesla’s quarterly filing reveals a company in transition. Automotive revenue fell 3% to $20.56 billion, and vehicle deliveries slipped 2% to 486,532 units. Energy revenue dropped 16% to $2.88 billion, partly due to tariff-related customer refunds, even as storage deployments rose 10% to 13.7 GWh. Services and other revenue climbed 33% to $4.61 billion, offering a rare bright spot.

There were genuine operating improvements: automotive gross margin excluding regulatory credits reached 18.1%, up from 16.3% in the second quarter and 15.4% a year earlier. But operating expenses surged 39%, absorbing much of that gain. Tesla ended the quarter with $45.45 billion in cash and short-term investments.

The company also reduced its 2026 capital-expenditure outlook to approximately $20 billion from more than $25 billion, a move that supports near-term cash flow but raises questions about delayed investments in robotaxis, AI, and humanoid robots. JPMorgan (JPM)’s Rajat Gupta, who raised his target to $430 from $415 while maintaining a Neutral rating, cautioned that the capex cut may defer spending needed to realize longer-term opportunities.

The Robotaxi and AI Promise

Management continues to tout progress in autonomous driving and energy storage. Tesla reported that FSD (Supervised) is now available in nine EU countries, following four additional approvals since the second quarter. However, the company emphasizes that the system requires active driver supervision and does not make the vehicle autonomous. Consumer FSD and driverless robotaxi operations should not be conflated.

Tesla also reported nearly two million cumulative unsupervised robotaxi miles, and Cybercab began providing rides in Austin on September 3. But wider commercial deployment still requires evidence of safety and workable operating economics. The company expects robotaxi operations to become a more noticeable financial contributor in 2027, a forecast that remains unproven.

In energy, Tesla has begun Megapack production at its Texas factory, with planned annual capacity of 50 GWh. The company cites record energy-storage orders and backlog as data centers and constrained electricity grids increase demand for batteries. Yet the energy segment’s revenue decline shows that growth is not linear.

A Merger in the Background

One wildcard is the exploratory merger between Tesla and SpaceX. Both companies have formed special committees to consider a possible combination, according to people familiar with the matter. The talks are at an early stage, and no agreement has been reached. Analysts note that such a deal could introduce geopolitical complications, given Tesla’s substantial Chinese operations and SpaceX’s ties to the U.S. government. Neither company has commented publicly on the status of the discussions.

What to Watch

In the near term, investors will focus on delivery growth, automotive margins, and whether positive cash flow persists as capital spending changes. Tesla says it has its largest passenger-vehicle backlog in four years but also identifies battery supply as a production constraint. The expiration of U.S. federal EV tax credits has removed a demand support, while high gasoline prices have encouraged EV demand in Europe. Competition from Chinese manufacturers like BYD (1211.HK) and Xiaomi (1810.HK) continues to intensify.

Longer term, the valuation debate hinges on whether Tesla can turn its robotaxi, AI, and robotics ambitions into durable earnings. Canaccord’s $442 target applies roughly 40 times its projected 2028 adjusted EPS of $11.06, explicitly awarding a premium for long-duration opportunities. Goldman’s $360 target, by contrast, emphasizes pressured profitability and valuation risk. The next major test will be whether Tesla can deliver on those promises—not merely achieve additional product milestones.

Correction: An earlier version of this article misstated the direction of CLSA’s rating change. It was an upgrade to Hold from Underperform, not a downgrade.