Though Tesla (TSLA) stock is lower following the release of its first quarter earnings report, Wall Street analysts are generally encouraged, though cautious.
Tesla’s larger-than-expected $25 billion capital expenditures guide caught many off guard, as it was more than investors expected.
“TSLA would be moving higher after-hours, instead of trading sideways, if not for a $5B increase in the 2026 capex outlook,” Piper Sandler analyst Alexander Potter wrote on Wednesday night. “The previous outlook (of $20B) was already around 2x higher than Tesla’s previous peak, and the new outlook (of $25B) illuminates the scale of Tesla’s ambition. Since Q1 capex was only $2.49B, Tesla’s updated guidance implies strongly negative free cash flow for the rest of 2026.”
Potter added that on the plus side, Tesla’s AI investments are “bearing fruit,” with Full Self-Driving (FSD) subscriptions in particular jumping. Potter reiterated his Overweight rating and $500 price target.
Morgan Stanley’s Andrew Percoco echoed the sentiments regarding capital expenditures, but added that the short-term pain is worth it for Tesla’s long-term prospects.
“Tesla is entering a phase of materially higher capex as it expands its manufacturing footprint across energy, autos, and semiconductors, while also investing heavily in compute and next-generation physical AI infrastructure (robotaxi and humanoids),” Percoco wrote early Thursday, adding that the bank reiterates its Equal Weight rating and $415 price target. “We view this investment cycle as necessary to establish a durable leadership position in autonomy and physical AI, and remain confident in Tesla’s long-term trajectory.”
Percoco added that Tesla’s robotaxi rollout, implementing a “slow and steady” approach, is the right way to go, despite being slower than investors expect. Accumulating NHTSA data that tracks safety metrics of the robotaxi fleet versus rival Waymo’s progress in its early stages will be key, he said.
Caution was the name of the game post-earnings for William Blair’s Jed Dorsheimer as well. An “abundance of caution” approach to robotaxi expansion is commendable, he said, as a high-profile incident or crash would be a huge backward step for Tesla, and the policy landscape would tilt against it.
Dorsheimer was also on board with Tesla and CEO Elon Musk’s cautious approach to Optimus robots.
“Optimus V3 was supposed to debut in April, but Musk pushed that back until production start because competitors analyze and copy. The production start is slated for July/August, but the ramp-up is “literally impossible to predict,” he said. “To Musk’s credit, fully disassembling a vehicle line and standing up a completely new product line in a few months is a herculean task.”
