Investor's Corner
TSLA analyst summarizes Model 3 ramp: “Tesla failed on its original plan, but achieved a world-class result”
Elon Musk was not exaggerating when he described the Model 3 ramp as a “bet-the-company” situation. After handing over the first 30 units of the Model 3 in July 2017, Elon Musk candidly welcomed Tesla’s employees to “production hell.” As the following year would prove, the vehicle’s ramp would be exactly that — a challenging, upward climb filled with multiple painful bottlenecks.
Elon Musk mentioned during an episode of the Recode Decode podcast last month that Tesla is now at a point where it is no big deal for the company to produce 5,000 Model 3 per week. Musk noted, though, that Tesla’s employees had to put “excruciating effort” in refining and improving the Model 3 ramp to get to where it is today. The result of this effort was recently described by a Wall Street analyst after a visit to the Fremont factory.
Pierre Ferragu of New Street Research is one of Tesla’s most prominent supporters in Wall Street. The analyst, who holds a $530 price target on the electric car maker, stated in a note on Tuesday that Tesla made a lot of mistakes during the Model 3 ramp. Ferragu even described the Fremont factory as a “crowded mess” in its current state due to the facility’s complexities. An example of this was an intricate conveyor belt system that was eventually scrapped and replaced with human workers, resulting in the process being 30% less productive than what Tesla initially anticipated.
While Tesla’s failures with the Model 3 ramp were notable, Ferragu stated that it is these failures that make Tesla a company that is worth supporting. The Wall Street analyst wrote that Tesla’s production processes are only bound to get better from this point, particularly as the company is in a constant state of improvement. Ferragu pointed out that the lessons that Tesla learned from its initial failures with the Model 3 ramp would likely result in future sites for the vehicle’s production — such as Gigafactory 3 in Shanghai — to be optimized faster and more efficiently.
“All these (mistakes) feed a lot of (the) bear argument on the company. We see it the exact opposite way. Failure is where one learns the most. By shooting way too high, Tesla failed on its original plan, but achieved a world-class result. The next production sites will be much more efficient, and will ramp very rapidly.”
The Wall Street analyst’s optimistic outlook on Tesla comes amidst yet another vote of confidence from CFRA, an independent investment research firm. In a recent note to its clients, CFRA raised its price target for the electric car maker to $420 per share, an 11% increase from its previous PT of $375. The firm stated that its updated price target was due to the “limited impact” of competing electric cars in 2019, as well as improving headwinds in China. Just like the New Street Research analyst, CFRA also cited further improvements and efficiencies in Model 3 production as one of the reasons behind its positive stance on Tesla.
While Tesla has already achieved milestones in its Model 3 ramp, it should be noted that the company is only halfway towards its target numbers for the electric sedan’s production. Tesla eventually aims to manufacture 10,000 Model 3 per week, particularly as the vehicle starts getting delivered to territories such as Europe and Asia. In this light, Ferragu stated in his note that Tesla’s Model 3 ramp to 10,000 per week would likely be a far less painful process for the company.
“The road to 7,000 units per week seems easy, and limited capital expenditures will be required (in the low tens of millions) to get to 10,000,” the analyst wrote.
As of writing, Tesla stock (NASDAQ:TSLA) is trading down 1.70% at $353.58 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.
SpaceX officially acquires xAI, merging rockets with AI expertise
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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