Jefferies raises its Tesla forecasts again but maintains a Hold rating
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Jefferies raises its Tesla forecasts again but maintains a Hold rating
The report raises Tesla's revenue, EBIT, and price target to $400 due to Q2 deliveries significantly exceeding expectations, but believes Robotaxi scaling remains slow and valuation already reflects substantial expectations for long-term success.
- Q2 deliveries were 480.1 thousand vehicles, significantly above the market consensus of 406 thousand and Jefferies' previous forecast of 415 thousand.
- Jefferies raised its Q2 group revenue forecast to $28.7bn and group EBIT to $1.45bn, implying a 5.1% margin.
- The FY2026 EBIT forecast was raised 4% to $6.2bn, while forward annual EBIT forecasts were raised by approximately 6%.
- The price target was raised from $375 to $400, but still implies -2% downside relative to the previous trading day's closing price of $407.76; the HOLD rating was maintained.
- The report believes low Cybercab production suggests Robotaxi scaling is not imminent, while governance remains a key risk.
Report interpretation
Overview
In this Tesla company research report, Jefferies again raises its forecasts, with the key trigger being automotive volumes in Q2 substantially exceeding expectations. In particular, sales performance in China and Europe validated the value proposition of Tesla vehicles in terms of price and efficiency. The report also notes that strong volumes reinforce the risk assessment of long-term commoditization in autos, meaning Tesla still needs to balance its investment pace between the personal vehicle business and new growth areas such as Robotaxi, AI, energy storage, and Optimus.
Core views
The report's core view is that Tesla's operating momentum is beginning to recover from years of declining growth and profitability, but the connection between valuation and near-term earnings remains weak. Q2 deliveries above expectations support higher revenue and EBIT forecasts, and Tesla may still be able to self-fund investments in FSD, Dojo, Optimus, and energy storage. However, Robotaxi progress is slower than market expectations implied by valuation, free cash flow is still expected to be negative in 2026, and governance structure and Elon Musk's control continue to pose significant risks.
Analysis framework
The report uses a scenario-based risk/reward framework and sum-of-the-parts valuation: a base-case price target of $400, a downside case of $250, and an upside case of $550. The automotive and manufacturing businesses are primarily valued using DCF, while longer-term businesses such as Robotaxi, Energy, and Optimus are assessed using EV/sales multiples, comparable transactions, and growth assumptions. Earnings forecasts are updated based on Q2 deliveries, automotive revenue, ZEV credits, leasing, BESS deployments, gross margins, capital expenditures, and working capital changes.
Methodology notes
The automotive manufacturing business uses DCF, while Robotaxi, Energy, and Optimus are assessed using multiples and comparable transactions.
Jefferies values traditional automotive and manufacturing cash flows separately from long-term technology growth businesses to reflect the decoupling of operating profits from forward-looking expectations in Tesla's valuation.
Base case $400, upside case $550, downside case $250.
The upside case depends on breakthroughs in battery costs, FSD validation, and Robotaxi commercialization, while the downside case focuses on competition, capital expenditures, autonomous-driving delays, funding requirements, and EBIT margins below 5%.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Tesla, Inc. (TSLA.O)Core covered security
- Strengths
- Q2 deliveries significantly exceeded expectations, with price and efficiency advantages remaining strong; vertical integration, software, AI, manufacturing efficiency, and the energy storage business provide long-term strategic support.
- Weaknesses
- Growth stagnated over the past three years, while EBIT and FCF declined substantially; free cash flow is expected to be negative in 2026; early-stage Robotaxi and Optimus investments may weigh on profits.
- Comparison
- The report believes Tesla's EV gap relative to traditional OEMs is no longer widening, while its advantage over Chinese competitors continues to narrow, although competitive pricing is supporting a recovery in growth.
- Risks
- Delays in Robotaxi scaling, product competition affecting volumes and residual values, capital expenditures exceeding expectations, inability to maintain self-funding capacity, and governance risks.
- Potential SpaceX merger themeLong-term strategic and valuation option
- Strengths
- The report believes SpaceX and Tesla are converging in their positioning within U.S. space, energy, manufacturing, and semiconductor strategies, and a potential merger could create perceived synergies.
- Weaknesses
- The timing, structure, regulatory environment, and allocation of shareholder benefits related to a merger remain uncertain.
- Comparison
- This theme is primarily a long-term strategic valuation driver rather than a reflection of current automotive fundamentals.
- Risks
- Elon Musk's pursuit of control, increased governance complexity, and delays to joint investment.
Key data
- RatingHOLDJefferies maintains its HOLD rating.
- Price target$400.00Raised from $375.00 to $400.00.
- Current price$407.76Previous trading day's closing price.
- Price target upside-2%Based on the current price of $407.76 and the $400 price target.
- Q2 deliveries480.1 thousand vehiclesModels 3/Y accounted for 467.8 thousand vehicles, above the consensus estimate of 406 thousand.
- Q2 group revenue forecast$28.7bnAutomotive revenue is forecast at approximately $21bn, including assumptions for ZEV credits and leasing revenue.
- Q2 group EBIT forecast$1.45bnImplying a 5.1% EBIT margin.
- FY2026 EBIT forecast$6.2bnRaised 4% from the previous forecast.
- Change in forward annual EBIT forecastsRaised by approximately 6%The report remains below market consensus due to early Robotaxi and Optimus losses.
- FY2026 free cash flow forecastApproximately -$7.5bnIncludes approximately $23bn in capital expenditures.
- Expected liquidityApproximately $41.7bnQ2 assumptions include $3.0bn of cash consumption and $6.9bn of capital expenditures.
- Market capitalization$1.4TAs disclosed in the report table.
Impact & implications
The report's marginal impact on Tesla is moderately neutral to positive: higher earnings estimates and a higher price target reflect Q2 volume resilience and cost-efficiency advantages, but the target price remains below the current price, indicating that the stock already discounts substantial value from Robotaxi, AI, and the long-term strategy. For investors, the near-term focus should be on whether deliveries, gross margins, capital expenditures, and free cash flow continue to improve, rather than relying solely on long-term vision to expand the valuation.
Risks
- Further delays in scaling Robotaxi/FSD and validating true autonomous driving.
- Intensifying product competition affecting volumes, pricing, and used-vehicle residual values.
- Expansion capital expenditures in 2026-2027 may exceed $20bn, while capital expenditure efficiency has not improved.
- Tesla may be unable to continue self-funding and may require external financing.
- Long-term EBIT margins below 5%.
- Corporate governance, concentration of power, and Elon Musk's unconventional communications remain major risks.
What to watch
- The launch of Robotaxi services and whether FSD is validated as true autonomous-driving software.
- Whether Tesla's network business can establish a low-capital-expenditure, low-operating-expense model.
- The growth rate of energy storage and other applications.
- Changes in governance and management structure.
- Whether automotive gross margins can return to above 20% and operating margins return to double digits.
- The pace of improvement in capital expenditures, working capital, and free cash flow.