Investor's Corner
Tesla skeptic changes tune on Model 3 battery costs: ‘TSLA remains ahead of the pack’
Longtime Tesla skeptic UBS appears to be taking a rather bullish outlook on the electric car maker. In a recent note, UBS analyst Colin Langan raised his price target for Tesla stock (NASDAQ:TSLA) from a conservative $190 to a more optimistic $230, citing the Model 3’s battery cost advantages over competitors currently available in the market.
The UBS analysts, together with a group of engineers, analyzed batteries from Panasonic/Tesla, LG Chem, Samsung SDI, and Contemporary Amperex Technology (CATL). According to the team’s analysis, the Model 3’s batteries, which are produced at the Gigafactory 1 in NV, are around 20% more cost efficient than LG Chem’s batteries, which are the second-best in the list. The UBS analysts estimated that Tesla’s batteries currently cost $111 per kWh, which is around $37 per kWh cheaper than LG Chem’s batteries, its closest competitor.
In what could only be described as an admission of miscalculations in the past, UBS analyst Colin Langan, who has consistently given TSLA a “Sell” rating, noted that the firm now believes that competitors from established automakers would likely be less profitable than the electric car maker in the EV market.
“Contrary to our team’s previous view, they now believe incumbent OEMs will be less profitable than Tesla in EV space. Tesla’s cost advantage can be defended (at least temporarily) because other OEMs will not switch to cheaper NCA chemistry. We continue to believe that TSLA remains ahead of the pack when it comes to EV tech,” the analyst noted.
Based on Tesla’s lower cost battery and considering non-zero emission electric vehicle credits, the UBS analyst also boosted his fiscal 2019 earnings per share estimate for the electric car maker by $5.85 to $3.55, as noted by The Fly. Keeping his longtime stance on the company, though, Langan nevertheless maintained a “Sell” rating on Tesla, with a price target of $230.
While the financial firm remains notably skeptical about Tesla as evidenced by Langan’s consistent “Sell” rating, UBS’ admission of the Model 3’s battery cost advantages could very well signify a shift in Wall Street’s general perception of the electric car maker. Together with a vote of confidence from Zacks Investment Research in the form of a “Strong Buy” rating after Tesla’s release of its third quarter earnings, Tesla’s capability to maintain profitability in the coming quarters is beginning to appear incredibly feasible.
Elon Musk noted during the third quarter earnings call that Tesla would have a positive net income and cash flow in the present quarter, and in all quarters moving forward. Musk even remarked that even in times when Tesla has to conduct repayments, the company should display a flat cash flow.
“We expect to again have positive net income and cash flow in Q4. And I believe our aspiration is something that will be for all quarters going forward. I think we can actually be positive cash flow and profitable for all quarters going forward, leaving aside the quarters where we may need to do a significant repayment but — for example, in Q1 next year. But I think even in Q1, I think we can be approximately flat in cash flow by end of quarter,” Musk said.
Behind these predictions lies Tesla’s battery technology, which continues to get better over time. As noted by President of Automotive Jerome Guillen, Tesla’s batteries are always in a state of improvement. Thus, while UBS’ analysis has concluded that the Model 3’s batteries are the best in the market, Tesla’s batteries in the coming months would likely show an even wider gap over its competitors.
“We are improving the design of the cell. The design of the cell is not frozen. It evolves, and we have a nice roadmap of technology improvements for the coming years,” Guillen said.
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.
Will Tesla join the fold? Predicting a triple merger with SpaceX and xAI
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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