$TSLA · Parkev Tatevosian, CFA · 2026-10-26

Tesla announced its quarterly financial results with revenues of $28 billion, a figure that is almost unchanged compared to the same period last year. Earnings per share fell 44% compared to last year, as sales do not grow, while the company spends heavily to roll out next-generation technologies such as self-driving cars and robots.

But does all this finally make Tesla stock a buying opportunity in my view? Remember that I have not rated this stock as a buying opportunity all year. In fact, at the beginning of 2026, I warned investors that the stock was overvalued and that as many shares as possible should be sold.

I personally shorted the stock and then closed my position when the stock price dropped to $300, making a good profit.

So, how do I feel about Tesla stock today after the company announced its latest financial results? Tesla’s biggest obstacle is its declining competitive position in the electric vehicle industry as competitors from China spread with newer models equipped with more technology and sold at lower prices.

Tesla's sales are facing difficulties in every region where it competes with those Chinese models or new energy models.

Overall, automotive sector revenues declined by 3% year-on-year to $20.5 billion. The power generation sector, which was previously a good growth category for Tesla, has slowed down as competition enters the market and tariffs affect its ability to sell its products at comparable market prices. That sector saw a 16% decrease in revenue.

But there was good news. Services and other revenues rose 33% to $4.6 billion. That sector now accounts for about 25% of its automotive sector revenue. I expect that in the long run, other categories will grow to become more important for Tesla.

Total revenue was $28 billion, exactly the same as last year, but Tesla had to spend much more money to achieve the same revenue.

Interest rates have risen worldwide, and one of the things some car manufacturers like to do is offer customers lower interest rates compared to market rates, and this represents a cost on the company’s overall operating line.

Overall, the operating profit margin fell to 2.6%, down from 5.8% in the same quarter last year. Operating profit margins have been decreasing as sales have remained stagnant and expenses have increased.

Total operating income fell by 56% to $718 million.

Fortunately, cash flow from operations remained steady at $26.2 billion, as the management team did a prudent job of adapting to the current reality. They do not produce the same number of vehicles.

In fact, they have finished production of their most expensive models, and they are not producing as many vehicles as they are selling, which is reducing their inventory balance because demand for electric cars is nowhere near what Tesla had hoped for by this time of 2026.

Remember, a few years ago Tesla was expecting to be able to sell between 10 and 20 million electric cars, or rather, I should say 20 to 30 million electric cars per year. Well, they probably sold the most electric cars in a single year, around 2 million cars.

This is probably the maximum rate of electric vehicles they will end up selling in a single year unless there is a radical change between now and the future, because that is what the management team expects, that they are no longer focused on selling electric vehicles.

They want to shift their focus to self-driving taxis and robots.

The good news for Tesla stock investors is that the company continues to make progress in supervised self-driving technology. Active Full Self-Driving (FSD) subscriptions rose by 67% to 1.74 million.

This is up from 1.48 million in the previous quarter only, and up from 1.04 million at the same time last year. So, they added 740,000 full self-driving subscriptions last year, which cost approximately $99 per month, or $1,200 per year.

So, this is a recurring revenue service with a high profit margin and good for Tesla, and will be a major driver of the company's profitability in the future.

I wouldn't be surprised if Tesla were happy to sell its cars at cost price if the customer was willing to pay for a full self-driving subscription, and that's where the company could recoup its investment and make a profit.

Another positive development is that they have begun mass production of the Tesla "Semi" truck, their heavy-duty Series 8 pickup truck. The top-of-the-line model can travel 500 miles with an 82,000-pound payload while achieving an efficiency of 1.7 kWh per mile.

Of course, this comes at the right time as the war in Iran has caused oil and diesel prices to rise significantly. Truck drivers are complaining about the high cost of refueling their diesel trucks.

This is a great time to own an electric truck. If they manage to bring this to market, that's when businesses, truck drivers, and individual truck operators will look to this as an option, because the cost of filling up your truck is increasing so dramatically.

This is one of the major reasons that drives people towards electric cars, and that is the operating cost resulting from filling the fuel tank.

In more good news, they have received four additional market approvals for supervised autonomous driving: Croatia, Slovenia, the Czech Republic, and Slovakia. This means more potential subscription revenue, with a high profit margin for Tesla.

Expanding the availability of this service makes the car more attractive to buy. One of the reasons people buy a Tesla electric car is their ability to purchase the supervised self-driving feature.

This feature is not available with the same strength and effectiveness as that offered by Tesla. It could be argued that it is two steps ahead of the competition, and I wouldn't disagree if you said it is three steps ahead of the competition with regard to car manufacturers who sell this feature as part of the ordinary everyday cars that people can buy.

Therefore, testing of robotic taxis continues in Austin, Texas. They've now reached about a thousand vehicles in total, haven't they? I believe the last numbers I saw were around 480 Tesla Model Y cars being tested in Austin, in addition to around 400 to 500 Cyber Cab cars also being tested in Austin.

So, they now have about a thousand of these vehicles being tested in Austin, Texas.

Remember that Elon Musk has close ties with politicians in Texas, so it's easier to get approvals to expand testing, licensing, etc. The regulatory process is likely to be more difficult for Tesla in markets outside of Texas.

But the tests will continue. They will follow the approach of Waymo, which is expanding into new cities. As Waymo expands into a new city and begins testing and following that process, Tesla can take advantage of that and observe what Waymo is doing and then follow the same process to try to get into that city or jurisdiction.

And if they have to do it first with a driver, or a Tesla employee, inside the vehicles, they can do that too. They can proceed with extreme caution.

Tesla is in no hurry to do that. Tesla is in no hurry to achieve this goal of having "Cyber Cab" cars deployed throughout the United States. They can be patient. They can be extremely cautious because their shareholder and investor base is willing to tolerate it, right?

Since 2016, Elon Musk has been saying that self-driving car technology is only a year away. Tesla stock investors were prepared to wait as delays piled up, the deadline was postponed repeatedly, costs increased more and more, and the product launch time was consistently delayed.

Tesla's stock investors have remained committed to the company. There was no significant decrease in the company's valuation, either when measured on a price-to-earnings basis or when viewed on a discounted cash flow basis.

The stock is still trading at a very high valuation despite all the headwinds and all the delays that have accumulated at Tesla.

So, my view is that they have a very patient shareholder base, so they can use that to their advantage to handle this carefully and make progress without rushing into something that might put them at risk of making a serious mistake, which again I think is a prudent strategy.

I think many of the strategies that Tesla adopted were very prudent. I think it's one of the best-run companies in the world, and has some of the best decision-making processes as well.

Elon Musk predicted many years ago that sales of electric cars would never come close to what was estimated. And so he made that shift towards self-driving cars and robots, and convinced the shareholder base to be patient while they made this transition, which I considered a very proactive step; The ability to anticipate and make this change before the worst happens in the electric vehicle sector as competition increases.

So, you mentioned the rating. The stock is currently trading at a forward price-to-earnings ratio of 175. 175 is approximately six times the average valuation of stocks in the S&P 500 index.

It's almost 40 times the average rating of car companies. It is almost six times the valuation of major AI companies such as Nvidia, Alphabet, Microsoft, Amazon, Meta, and others.

The stock is more expensive than any other comparison you could make, by a very large margin, not a small one. It is more expensive by a factor of 4 to 20, depending on which competitors you are comparing it to.

So, as I mentioned, it is trading at a very high valuation, as if all these promises and expectations made by the company were inevitable. Not only possible, but inevitable. That has already been taken into account in the evaluation, and even more so.

Therefore, I also updated my assessment of Tesla's discounted cash flows, and revised my estimates upwards for the next few years. One of the reasons I revised my estimates upward for this year in particular is that the company lowered its capital expenditure estimates.

Instead of spending $25 billion, they will spend $20 billion. Therefore, this will reduce the negative cash flow for 2026.

Overall, I value the company at $113 per share. It is trading today at $379. I see a potential drop of around 70% here over the next twelve to eighteen months.

If Tesla's investors woke up and said, "You know what? Maybe this stuff isn't going to be as great as Elon Musk says it will be. Maybe it's going to take much longer than Elon Musk says it will take.

Maybe it's going to cost a lot more than Elon Musk says it will. And maybe the revenue and profits it's going to generate are a little less than Elon Musk claims it will." If they ever came to this realization, and if Tesla's shareholders took it into account, there could be a significant drop from this point in Tesla's stock price.

One reason the stock has continued to trade at such a high valuation is its very patient shareholder base, which is willing to ignore these short-term drawbacks and risks, and continue to hold shares and buy more every time there's a dip.

So, earlier this year, I mentioned that I had rated Tesla as a sell opportunity. And for most of the year, I rated it as a sell opportunity. But when the price dropped to $300, I upgraded it to a hold rating, believing it wasn't as overvalued at $300 as it was approaching.

$400. You can see that the stock has recovered quite strongly from those lows in July when it dipped below $300 a share. It's now climbing to $380 a share. So, now that the price is back nearing $400, I'm no longer optimistic about the comfort of holding the stock.

Therefore, I'm going to downgrade it again to a sell opportunity. I'll update that today, October 22, 2026.

I'm inclined to buy put options on Tesla stock again. I've done this a few times before. The first time I did was in 2025. I made a return of over 100% on those put options I bought in 2025 when the stock price crashed.

Remember when Elon got embroiled in political scandals and the stock price crashed? I made a substantial profit on those put options. Then, in early 2026, I added in and got new put options that had started in December 2025, actually.

And when the stock price dropped to around At $300, I closed those positions and made a good profit on those put options as well. So, I'm successful two out of two times in shorting Tesla stock.

At these levels around $380, I'm now more inclined to acquire more put options on Tesla. As it approaches $400, I'll be even more inclined to add some put options to my portfolio.