Tesla’s Profit Fell 43% and the Stock Held Up. Here’s Why

Tesla (NASDAQ:TSLA | TSLA Price Prediction) closed at $386.47 the day it reported a steep drop in profit. The 24/7 Wall St. price target for Tesla is $404.84 over the next 12 months. That means 4.75% upside and a hold rating. We have high confidence in the call.

Third-quarter net income fell 42.68% to $787 million, and shares slid only 0.91% on earnings day. The stock held up because the damage was below the gross profit line.

Gross profit rose 8.71%, while R&D climbed to $2.76 billion from $1.63 billion to fund autonomy, Optimus and AI computing power. Adjusted EPS of $0.48 beat the $0.4511 consensus.

A Calm Reaction After July’s 14.52% Selloff

Compare that with the second quarter, when an EPS miss sent shares down 14.52% in one session. Tesla traded at $382.90 midday. That leaves it up 4.29% over the past week and 2.03% over the past month, but down 14.86% year to date. It sits between a 52-week high of $498.83 and a low of $297.38.

Revenue of $28.046 billion came in essentially flat year over year. Deliveries reached 486,532, and Tesla ended the quarter with its highest backlog in four years.

Management also cut full-year capex guidance to about $20 billion. Meanwhile, Elon Musk suggested at a tie-up with SpaceX, which keeps merger speculation alive.

Robotaxi, Optimus and Megapack Fuel the Case for $466.97

Paid FSD subscriptions reached 1.74 million, up from 1.04 million. More than 75% of North American deliveries came with an FSD sign-up. The Cybercab fleet in Austin has grown tenfold since launch, and executives see Robotaxi becoming a significant profit contributor in 2027.

Megapacks are almost sold out for 2027. Energy gross margin also rose from 20.4% to 33.1%. Of the analysts covering Tesla, 19 rate the stock a buy or better. The bull case reaches $466.97, a 20.83% gain.

Spending Strain Could Push Shares Toward $363.68

Operating income dropped 55.79%. Capex rose 110.5%, which cut free cash flow to $1.531 billion. Management expects operating expenses to keep rising until the new products are launched. Part of the energy margin gain came from tariff refunds and warranty true-downs, which may not repeat.

On the other side, operating cash flow held at $6.263 billion and cash grew to $45.447 billion, so this looks like heavy investment funded from a strong balance sheet. The bear case is $363.68.

Tesla Trades at 159x Forward Earnings While GM Sits at 6x

General Motors (NYSE:GM) is the clearest example of how the market values a legacy automaker. Its forward P/E is 6x and its price-to-sales ratio is 0.36. That gap shows how much autonomy value is already priced into Tesla.

Rivian Automotive (NASDAQ:RIVN), a U.S. EV rival, posted a TTM profit margin of -55% and still trades at 3.059x sales. Tesla, by contrast, is profitable and holds net cash. Against these peers, our modest 24/7 Wall St. price target looks reasonable.

Tesla Price Prediction 2026-2030

I rate Tesla a hold with a 24/7 Wall St. price target of $404.84 and high confidence. What tips the scale is that rising gross profit and steady cash flow offset the spending surge.

I would turn more positive if Robotaxi revenue shows up in 2027 numbers. I would stay patient if operating margins keep shrinking without commercial launches to justify the cost.

The projections rest on Tesla continuing to carry out its current strategy. A faster Robotaxi launch or a SpaceX combination could push results well above this path. Regulatory delays could drag results lower.

Contact [email protected] for any questions or corrections.