Tesla’s Q3 Earnings: Analysts Divided on AI Hype vs. Fundamental Realities

Earnings Showdown: Tesla Faces Critical Test Amid Diverging Analyst Views

Tesla prepares to unveil its third-quarter earnings Wednesday afternoon, presenting what could be a defining moment for Elon Musk’s electric vehicle empire. The company enters this earnings season amid unprecedented analyst division, with Wall Street’s top firms offering dramatically different assessments of Tesla’s valuation, growth prospects, and fundamental health.

The electric vehicle manufacturer already reported strong delivery numbers earlier this month, with 497,099 vehicles delivered in Q3 – a 7% year-over-year increase that significantly exceeded analyst expectations. However, this performance came with an important caveat: the figures were heavily influenced by consumers rushing to purchase vehicles before the expiration of a key $7,500 federal tax credit on September 30., according to additional coverage

The Great Divide: Wall Street’s Conflicting Assessments

Analysts surveyed by FactSet project Tesla will report earnings of 56 cents per share, representing a 22% year-over-year increase, on revenue of $26.54 billion. These optimistic projections come despite Tesla’s second-quarter miss on both top and bottom lines, where automotive revenue declined to $16.7 billion from $19.9 billion a year earlier.

The analyst community appears fundamentally split on Tesla’s trajectory. According to LSEG data, 26 of 54 analysts rate Tesla as a buy or strong buy, while 17 maintain a hold rating and 11 consider the stock an underperform or sell. This division reflects deeper questions about whether Tesla should be valued as a traditional automaker or as an artificial intelligence and autonomy company.

Bearish Perspectives: Warning Signs Amid the Hype

Wells Fargo maintains an underweight rating with a $120 price target, suggesting potential downside of approximately 73%. Their analysis acknowledges Tesla’s strong delivery numbers but expresses concern about future growth. “We raise our 2025E EPS from $1.20 to $1.35, but lower 2026E-2028E estimates reflecting weaker growth,” the firm noted, as previously reported,. They also highlighted regulatory challenges, noting that “FSD is now under another NHTSA investigation, impacting TSLA’s credibility on AV.”

UBS, while raising its price target from $215 to $247, maintains a sell rating, representing roughly 44% downside from current levels. The firm argues that “Tesla stock price is disconnected from fundamentals and the valuation is stretched.” Their analysis suggests that while Tesla’s AI initiatives show promise, “little consideration is given to how much present value is already attributable to these ventures in the current stock price.”

Neutral to Cautiously Optimistic Views

Barclays upgraded its price target from $275 to $350 while maintaining an equal weight rating. Their analysis acknowledges that “fundamentals have been secondary to the broader theme of AV/AI narrative command for Tesla.” However, they express caution heading into earnings, noting that “the deliveries beat and strong expected Q3 result are already priced into the stock.”

Cantor Fitzgerald, despite its overweight rating and $355 price target, acknowledges significant headwinds. Analyst Andres Sheppard noted the delivery beat was primarily driven by the tax credit expiration and expects “a weaker Q4.” The firm projects fewer deliveries in FY25 than in FY24, estimating approximately 1.8 million vehicles., according to technology trends

Bullish Outlooks: Betting on the AI Transformation

TD Cowen maintains a buy rating with a $509 price target, nearly 15% above current levels. Analyst Itay Michaeli points to “the CEO compensation proposal and continued AV/AI progress” as key catalysts. Despite the stock’s recent run-up, the firm believes “2026 expectations remain fairly muted given significant EV market pressures.”

Melius Research offers the most optimistic assessment with a $520 price target, representing 17% upside. The firm describes Tesla shares as “a must own” investment, arguing that “the disruptive force of AI will wreck multi trillion dollar industries, starting with auto.” Their valuation assumes “Tesla’s autonomy push is successful in passenger cars, converting a large share of the rideshare market to Tesla, and then expanding the market manyfold.”

Key Factors to Watch in Wednesday’s Report

Beyond the headline numbers, analysts will be closely monitoring several critical aspects of Tesla’s earnings report and conference call:

• Post-tax credit demand: How U.S. demand is holding up following the expiration of the $7,500 federal incentive
• Robotaxi network updates: Any progress on Tesla’s ambitious autonomous driving initiatives
• Margin performance: Whether Tesla can maintain profitability amid ongoing price competition
• Energy business growth: Contributions from Tesla’s increasingly important energy storage division
• CEO commentary: Elon Musk’s traditional focus on future technology during earnings calls

The upcoming November annual meeting adds another layer of significance to this earnings report, as Tesla management will likely use both events to reinforce the company’s long-term growth narrative around artificial intelligence and autonomy.

As Tesla continues its transition from pure-play automaker to technology and AI company, the divergence in analyst opinions reflects the fundamental uncertainty about how to value a company simultaneously navigating competitive electric vehicle markets while pursuing transformative artificial intelligence ambitions.

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