Down nearly 40% or up over 40%? Tesla's financial report shocks the market, with huge differences in Wall Street's future outlook

Tesla's strong profit increase in the third quarter has shocked the market, with the stock price soaring over 20% in mid-week after the financial report was released. However, Wall Street institutions have divergent views on the future trend of Tesla's stock price. Some are very optimistic, even predicting a rise of over 40%, while others are more cautious, believing that Tesla has not yet resolved long-term growth concerns, and even predicting a future stock price drop of nearly 40%.

The optimistic camp includes staunch Tesla bulls and Wedbush analyst Dan Ives. He has given Tesla an outperform rating and set a target price of $300 for the next 12 months, equivalent to an expected 40.4% increase from Wednesday's closing price. Ives stated that the increase in profit margin in the third quarter "clearly demonstrates that while balancing future plans, Tesla is still focusing on profitability."

Ives said:

"The days of price cuts are now firmly in the rearview mirror, in our opinion, and we view this as a key factor for Wall Street to gain confidence in Tesla's ability to improve margins as it continues its AI/FSD transition over the next several years. After a tumultuous 2024, the margin expansion was much needed and the bulls will be cheering this quarter."

Piper Sandler analyst Alexander Potter has given Tesla a neutral rating with a target price even higher than Ives, at $310, implying a 45% increase from Wednesday's closing. Potter commented that Tesla's third-quarter report "performed well in almost every aspect unexpectedly," and even if the facts prove the company's own expectations to be optimistic, there is still "upside potential."

Canaccord Genuity analyst George Gianarikas raised Tesla's target price by $24 to $278, expecting a 30% increase from Wednesday's closing. Gianarikas summarized Tesla's financial report as a "product cycle story of accelerating revenue and profit growth," and mentioned some positives, such as Tesla's announcement to start producing ultra-low-cost models next year, as well as plans to produce around 2 million self-driving robotaxi vehicles for the Cybercab business by 2026.

Truist Securities analyst William Stein maintained a hold rating for Tesla, slightly raising the target price expectation from $236 to $238, equivalent to an estimated 11.4% increase from Wednesday's closing.

Stein believes that Tesla's profit growth benefited from strong profit margin performance. However, he also pointed out that Tesla did not provide detailed information about the 2025 models, improvements to the Full Self-Driving (FSD) system, or details about the humanoid robot project, OptimusThe bearish representative is JP Morgan analyst Ryan Brinkman. He emphasized that while investors may be excited about Tesla's extraordinary profit growth, the catalysts driving this surge in stock price should not be seen as long-term growth factors. He advised investors not to focus too much on the "explosive rise" in Tesla's stock price immediately after the financial report, believing that the market reaction brought by the performance report is "unsustainable".

Brinkman pointed out that Tesla's profitability and cash flow improved in the third quarter, but the underlying factors behind these achievements are unsustainable. These include the so-called "carbon sales" revenue from selling carbon emission credits and abnormally high operating working capital gains.

Therefore, Brinkman maintains his underweight rating on Tesla. He raised Tesla's price target from $130 to $135, despite the 3.8% increase, the new target price is still 36.8% lower than Tesla's closing price on Wednesday, indicating that he expects Tesla's stock price to drop by nearly 37% from this Wednesday's basis.

TD Cowen analyst Jeff Osborne gave Tesla a hold rating with a target price of $180. This target price implies a decrease of nearly 15.6% from Wednesday's closing price. Osborne noted that Tesla's third-quarter performance was driven by strong gross margins and mentioned that the company's new car releases are still expected to proceed smoothly in the first half of next year.

Wolfe analyst Emmanuel Rosner gave Tesla an industry perform rating, believing that sustained growth in Tesla's stock price requires two key factors: confidence in accelerating growth in the automotive business and confidence in achieving fully autonomous driving. Rosner also mentioned that Tesla's management discussed these two points during the third-quarter earnings call.

In addition, Morgan Stanley analyst Adam Jonas gave Tesla an overweight rating, with a price target of $310, the same as Potter's, believing that the third-quarter performance "may mark the bottoming out of automotive profit expectations". However, Wall Street News mentioned earlier that Jonas and other Morgan Stanley analysts raised doubts about whether the growth concerns have truly eased.

These analysts listed a series of market concerns that are still unresolved, including the direction of Tesla's capital expenditure growth, the proportion of AI in capital expenditure, the return cycle, Tesla's development path in autonomous driving, government certification, and insurance before the full launch of fully autonomous driving technology in 2025, abnormal situations in the fourth quarter that may prevent profit margin expectations from being met, and where the expected growth of over 180% in energy storage systems in the fourth quarter will come from.

Mark Delaney and other Goldman Sachs analysts raised Tesla's target price from $230 to $250, expecting the stock price to rise by 17% from Wednesday's closing. These analysts maintained a neutral rating on Tesla, but expressed doubts about Tesla's ability to achieve FSD performance and vehicle delivery growth targets by 2025, as well as the sustainability of gross margins