Tesla TSLA is set to release its third-quarter 2025 earnings report on Oct. 22. Here’s Morningstar’s take on what to look for in Tesla’s earnings and stock.

Key Morningstar metrics for Tesla Stock

  • Morningstar Rating: ★★
  • Fair Value Estimate: $250.00
  • Morningstar Uncertainty Rating: Very High
  • Economic Moat: Narrow

Tesla earnings release date

  • Wednesday, Oct. 22, after the close of trading in the US

What to watch for in Tesla’s Q3 earnings

  • Robotaxi timeline: Market enthusiasm for Tesla’s robotaxi ride-hailing service has been the largest driver of the firm’s rally from its 52-week low in April. Robotaxi is currently testing, and management guided to a full product launch next year. We will look for an update on the earnings call to see if the guidance remains intact.
  • Standard Model Y / Model 3 versions: Tesla recently released the lower-priced “Standard” versions of its Model Y and Model 3 vehicles, featuring a sub-$40,000 price for each. We will look to hear from management on how fast they can ramp up production of these vehicles, as well as any long-term production targets.
  • Valuation: We view Tesla shares as significantly overvalued heading into earnings. The stock trades in 2-star territory, about 70% above our fair value estimate. We think the market is overly optimistic on Tesla’s robotaxi product and a lot of the upside is already priced into shares. We recommend investors wait for shares to trade below our fair value estimate before considering an entry point.

Fair Value estimate for Tesla

With its 2-star rating, we believe Tesla’s stock is overvalued compared with our long-term fair value estimate of $250. We use a weighted average cost of capital of just under 9%. Our equity valuation adds back nonrecourse and non-dilutive convertible debt.

In 2025, we forecast deliveries will fall to 1.65 million versus the 1.79 million deliveries in 2024. We expect first half deliveries will be affected by the new Model Y not being solid in all markets, especially in the beginning of the year. However, we forecast a better second half the year as the affordable vehicle enters production in the second half the year. As the company is ramping up production of the new vehicles, we expect automotive gross margins excluding credits will remain in the mid-teens, below management’s long-term goal of 20%.

Longer term, we assume Tesla delivers around 3 million vehicles per year in 2030 as the more affordable vehicle grows rapidly but also causes Model Y and Model 3 sales to decline. Our forecast is well above the 1.8 million vehicles delivered in 2024.

Economic Moat Rating

We award Tesla a narrow moat rating, stemming from the firm’s intangible assets and cost advantage. The company’s strong brand cachet as a luxury automaker commands premium pricing, while its electric vehicle manufacturing expertise allows the company to make its vehicles cheaper than its competitors.

Financial strength

Tesla is in excellent financial health. Cash, cash equivalents, and investments were around $37 billion and far exceeded total debt as of June 30. Total debt was around $7 billion; however, total debt excluding vehicle and energy product financing (nonrecourse debt) was less than $5 million.

Tesla’s future growth will be largely self-funded. With its positive free cash flow generation and large cash balance, we think Tesla should be able to easily fund its growth plans in the coming years.

Risk and Uncertainty

We assign Tesla a Very High Uncertainty Rating, as we see a wide range of potential outcomes for the company. The automotive market is highly cyclical and subject to sharp demand declines based on economic conditions. As an EV market leader, Tesla is subject to growing competition from traditional automakers and new entrants. As new lower-priced EVs enter the market, Tesla may have to cut prices, reducing the firm’s industry-leading profits. With more EV choices, consumers may view Tesla less favorably. The company is also investing heavily in R&D to develop autonomous driving software, robotaxis, and humanoid robots with no guarantee these investments will bear fruit. As of the last Securities and Exchange Commission filing, Tesla’s CEO owns roughly 12% of the company’s stock and uses it as collateral for personal loans, which raises the risk of a large sale to repay debt.

Tesla also faces political risk related to the political activities of CEO Elon Musk. Musk served as an advisor to US President Donald Trump but has since made statements against Trump’s policies. Musk also campaigned for the far-right Alternative for Germany party. These activities risk turning away some consumers from buying a Tesla.

TSLA bulls say

  • Tesla could disrupt the automotive and power generation industries with its technology for EVs, automated vehicles, batteries, and humanoid robots.
  • Tesla will see higher profit margins as it reduces unit production costs over the next several years.
  • Tesla’s full self-driving software should generate growing profits in the coming years as the technology continues to improve, leading to a robotaxi service, increased adoption by Tesla drivers, and licensing from other auto manufacturers.

TSLA bears say

  • Traditional automakers and new entrants are investing heavily in EV development, which will result in Tesla seeing a deceleration in sales growth and being forced to cut prices due to increased competition, eroding profit margins.
  • Tesla’s large investment into autonomous driving software will be value destructive as the robotaxi product will face delays and competition from Waymo, who already offers a robotaxi service.
  • CEO Elon Musk’s political activities could turn consumers away from buying Teslas in key markets, including the US and Europe, leading to lower sales and profits.

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Terms used in this article

Star Rating: Our one- to five-star ratings are guideposts to a broad audience and individuals must consider their own specific investment goals, risk tolerance, and several other factors. A five-star rating means our analysts think the current market price likely represents an excessively pessimistic outlook and that beyond fair risk-adjusted returns are likely over a long timeframe. A one-star rating means our analysts think the market is pricing in an excessively optimistic outlook, limiting upside potential and leaving the investor exposed to capital loss.

Fair Value: Morningstar’s Fair Value estimate results from a detailed projection of a company’s future cash flows, resulting from our analysts’ independent primary research. Price To Fair Value measures the current market price against estimated Fair Value. If a company’s stock trades at $100 and our analysts believe it is worth $200, the price to fair value ratio would be 0.5. A Price to Fair Value over 1 suggests the share is overvalued.

Moat Rating: An economic moat is a structural feature that allows a firm to sustain excess profits over a long period. Companies with a narrow moat are those we believe are more likely than not to sustain excess returns for at least a decade. For wide-moat companies, we have high confidence that excess returns will persist for 10 years and are likely to persist at least 20 years. To learn about finding different sources of moat, read this article by Mark LaMonica.