Investor's Corner
Tesla gets $420 price target over Model 3 efficiencies, “limited impact” from rivals
Tesla (NASDAQ:TSLA) recently received another vote of confidence from a prestigious Wall Street research firm. In a recent note, CFRA, an independent investment research company, stated that it was raising its price target for Tesla stock to $420 per share — the same amount that Elon Musk quoted earlier this year during his short-lived attempt at taking Tesla private.
CFRA analyst Garrett Nelson maintained the firm’s “Buy” rating on the company, despite the electric car market likely becoming far more competitive next year with the arrival of high-profile vehicles like the Porsche Taycan. In a note on Tuesday, Nelson stated that there would likely be “limited impact” from competition, particularly as Tesla is poised to undercut rival carmakers with the rollout of the highly-anticipated $35,000 base Model 3. The CFRA analyst’s updated $420 price target is an 11% increase from the firm’s previous PT of $375.
“We expect unit costs to continue to fall, reflecting improved operating efficiencies and fixed cost absorption,” Nelson wrote.
The CFRA analyst’s optimistic outlook bodes well for Tesla, particularly as the company has reached a point in Model 3 production where the key focus is now cost reduction and further optimizations, not simple manufacturing numbers. In his note on Tuesday, Nelson stated that he expects the production cost of the $35,000 Model 3 to drop as Tesla achieves more efficiences. If Tesla can achieve this next year, the CFRA analyst stated that the Model 3 could very well undercut its rivals in the EV market.
Apart from Model 3 efficiencies, the CFRA analyst further remarked that the “tariff truce” between the US and China would likely have a positive effect on Tesla’s business in the Asian economic superpower. Such developments, according to Nelson, would probably have “positive gross margin implications” for the electric car maker.
China is among the largest markets for electric cars in the world, with EV sales in the country expected to breach the 1 million mark this year. Tesla has established its reputation in China as a maker of premium electric vehicles, and the company’s brand has remained quite strong over the years. That said, the trade war between the United States and China, which saw a steep 40% tariff placed on vehicles like the Model S and Model X, forced Tesla to compete against locally-made EVs at a disadvantage. With the 40% tariffs in place, a fully-loaded Model S P100D, which costs around $147,000 in the United States, was priced at 1.47 million yuan ($221,937) in China.
Amidst the “tariff truce” reached by US President Donald Trump and Chinese President Xi Jinping, though, there is a good chance that the steep 40% tariff on Tesla’s electric cars would get lifted, if not significantly reduced. Such an adjustment actually happened earlier this year, when China briefly reduced import tariffs from 20-25% to just 15%. The adjustment was met with enthusiasm among electric car buyers, resulting in a Tesla store in Shanghai clearing out its Model X 75D inventory in 24 hours.
With better headwinds in China and even more breakthroughs in Model 3 production, the coming year would likely be even more historic for Tesla. That said, it remains to be seen how investors would react to CFRA’s adjusted TSLA price target, as trading is suspended on Wednesday due to former president George HW Bush’s funeral.
As of Tuesday’s close, Tesla stock was trading at $359.70 per share.
Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.
There are a lot of Tesla bulls out there who have astronomical expectations for the company, especially as its arm of reach has gone well past automotive and energy and entered artificial intelligence and robotics.
However, some of the most bullish Tesla investors believe the company could become worth $100 trillion, and CEO Elon Musk does not believe that number is completely out of the question, even if it sounds almost ridiculous.
To put that number into perspective, the top ten most valuable companies in the world — NVIDIA, Apple, Alphabet, Microsoft, Amazon, TSMC, Meta, Saudi Aramco, Broadcom, and Tesla — are worth roughly $26 trillion.
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Cathie Wood of ARK Invest believes the number is reasonable considering Tesla’s long-reaching industry ambitions:
“…in the world of AI, what do you have to have to win? You have to have proprietary data, and think about all the proprietary data he has, different kinds of proprietary data. Tesla, the language of the road; Neuralink, multiomics data; nobody else has that data. X, nobody else has that data either. I could see $100 trillion. I think it’s going to happen because of convergence. I think Tesla is the leading candidate [for $100 trillion] for the reason I just said.”
Musk said late last year that all of his companies seem to be “heading toward convergence,” and it’s started to come to fruition. Tesla invested in xAI, as revealed in its Q4 Earnings Shareholder Deck, and SpaceX recently acquired xAI, marking the first step in the potential for a massive umbrella of companies under Musk’s watch.
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Now that it is happening, it seems Musk is even more enthusiastic about a massive valuation that would swell to nearly four-times the value of the top ten most valuable companies in the world currently, as he said on X, the idea of a $100 trillion valuation is “not impossible.”
It’s not impossible
— Elon Musk (@elonmusk) February 6, 2026
Tesla is not just a car company. With its many projects, including the launch of Robotaxi, the progress of the Optimus robot, and its AI ambitions, it has the potential to continue gaining value at an accelerating rate.
Musk’s comments show his confidence in Tesla’s numerous projects, especially as some begin to mature and some head toward their initial stages.
Elon Musk
Tesla director pay lawsuit sees lawyer fees slashed by $100 million
The ruling leaves the case’s underlying settlement intact while significantly reducing what the plaintiffs’ attorneys will receive.
The Delaware Supreme Court has cut more than $100 million from a legal fee award tied to a shareholder lawsuit challenging compensation paid to Tesla directors between 2017 and 2020.
The ruling leaves the case’s underlying settlement intact while significantly reducing what the plaintiffs’ attorneys will receive.
Delaware Supreme Court trims legal fees
As noted in a Bloomberg Law report, the case targeted pay granted to Tesla directors, including CEO Elon Musk, Oracle founder Larry Ellison, Kimbal Musk, and Rupert Murdoch. The Delaware Chancery Court had awarded $176 million to the plaintiffs. Tesla’s board must also return stock options and forego years worth of pay.
As per Chief Justice Collins J. Seitz Jr. in an opinion for the Delaware Supreme Court’s full five-member panel, however, the decision of the Delaware Chancery Court to award $176 million to a pension fund’s law firm “erred by including in its financial benefit analysis the intrinsic value” of options being returned by Tesla’s board.
The justices then reduced the fee award from $176 million to $70.9 million. “As we measure it, $71 million reflects a reasonable fee for counsel’s efforts and does not result in a windfall,” Chief Justice Seitz wrote.
Other settlement terms still intact
The Supreme Court upheld the settlement itself, which requires Tesla’s board to return stock and options valued at up to $735 million and to forgo three years of additional compensation worth about $184 million.
Tesla argued during oral arguments that a fee award closer to $70 million would be appropriate. Interestingly enough, back in October, Justice Karen L. Valihura noted that the $176 award was $60 million more than the Delaware judiciary’s budget from the previous year. This was quite interesting as the case was “settled midstream.”
The lawsuit was brought by a pension fund on behalf of Tesla shareholders and focused exclusively on director pay during the 2017–2020 period. The case is separate from other high-profile compensation disputes involving Elon Musk.
Investor's Corner
Tesla (TSLA) Q4 and FY 2025 earnings call: The most important points
Executives, including CEO Elon Musk, discussed how the company is positioning itself for growth across vehicles, energy, AI, and robotics despite near-term pressures from tariffs, pricing, and macro conditions.
Tesla’s (NASDAQ:TSLA) Q4 and FY 2025 earnings call highlighted improving margins, record energy performance, expanding autonomy efforts, and a sharp acceleration in AI and robotics investments.
Executives, including CEO Elon Musk, discussed how the company is positioning itself for growth across vehicles, energy, AI, and robotics despite near-term pressures from tariffs, pricing, and macro conditions.
Key takeaways
Tesla reported sequential improvement in automotive gross margins excluding regulatory credits, rising from 15.4% to 17.9%, supported by favorable regional mix effects despite a 16% decline in deliveries. Total gross margin exceeded 20.1%, the highest level in more than two years, even with lower fixed-cost absorption and tariff impacts.
The energy business delivered standout results, with revenue reaching nearly $12.8 billion, up 26.6% year over year. Energy gross profit hit a new quarterly record, driven by strong global demand and high deployments of MegaPack and Powerwall across all regions, as noted in a report from The Motley Fool.
Tesla also stated that paid Full Self-Driving customers have climbed to nearly 1.1 million worldwide, with about 70% having purchased FSD outright. The company has now fully transitioned FSD to a subscription-based sales model, which should create a short-term margin headwind for automotive results.
Free cash flow totaled $1.4 billion for the quarter. Operating expenses rose by $500 million sequentially as well.
Production shifts, robotics, and AI investment
Musk further confirmed that Model S and Model X production is expected to wind down next quarter, and plans are underway to convert Fremont’s S/X line into an Optimus robot factory with a capacity of one million units.
Tesla’s Robotaxi fleet has surpassed 500 vehicles, operating across the Bay Area and Austin, with Musk noting a rapid monthly expansion pace. He also reiterated that CyberCab production is expected to begin in April, following a slow initial S-curve ramp before scaling beyond other vehicle programs.
Looking ahead, Tesla expects its capital expenditures to exceed $20 billion next year, thanks to the company’s operations across its six factories, the expansion of its fleet expansion, and the ramp of its AI compute. Additional investments in AI chips, compute infrastructure, and future in-house semiconductor manufacturing were discussed but are not included in the company’s current CapEx guidance.
More importantly, Tesla ended the year with a larger backlog than in recent years. This is supported by record deliveries in smaller international markets and stronger demand across APAC and EMEA. Energy backlog remains strong globally as well, though Tesla cautioned that margin pressure could emerge from competition, policy uncertainty, and tariffs.
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