CLSA Upgrades Tesla (TSLA) to Hold (3)

CLSA analyst Christopher Richter upgraded Tesla (NASDAQ: TSLA) from Underperform (4) to Hold (3) with a price target of $400.00 (from $310.00).

The analyst comments: “Tesla’s 3Q2026 operating income fell by 56% YoY, below our forecast but ahead of consensus. As the numbers are small, differences are not meaningful. Management took no questions on a potential SpaceX merger. Most of the discussion focused on initiatives like robotaxis, Optimus and Terafab. We raise our target price from US$310 to US$400, implying 4% upside, and upgrade Tesla from Underperform to Hold, seeing that sentiment around a merger trumps long-term risk worries.

Tesla’s 3Q operating income fell by 56% YoY to US$718m, below our estimate of US$966m but ahead of consensus’ ¥599m (Figure 1). Tesla overcame 2Q’s negative free cashflow to see a positive free cashflow of US$1.53bn in 3Q, down 62% YoY. Improved operating cashflows and lower capex both contributed to the change in direction. Our practice is to update our forecasts after the US SEC 10Q is published.

Tesla has moved away from being a clean energy company into an AI-driven one, like SpaceX, giving logic to a merger. With Musk saying that the idea has ‘merit’ and setting up committees to study it, we believe a merger will occur. Musk will likely move quickly, with polls showing the Republicans will lose control of Congress, and that could disrupt his plans. While there is little competitive overlap, the size of the companies will encourage some to demand a slow and careful merger study.”

For an analyst ratings summary and ratings history on Tesla click here. For more ratings news on Tesla click here.

Shares of Tesla closed at $386.47 yesterday.

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