Oppenheimer has reaffirmed its Perform rating on Tesla (NASDAQ:TSLA) amid the automaker's accelerated push into Physical AI initiatives, the firm said, even as it trims near-term revenue and earnings projections. Tesla's market capitalization sits at $1.43 trillion and it currently trades at a price-to-earnings ratio of 299.72, according to InvestingPro data.
The investment house pointed to Tesla's multi-year effort to construct a vertically integrated supply chain, an undertaking that Oppenheimer said will require several years to complete. That buildout and the company's broader AI-driven product roadmap prompted the firm to moderate its estimates for both the top and bottom line.
Oppenheimer specifically noted that timing for product rollouts - including the Cybercab and Optimus robots - is now likely to be pushed further into the future than previously assumed. The firm also highlighted CEO Elon Musk's elevated focus on supply chain resilience and geopolitical risk, saying that attention to those factors appears substantially higher at Tesla than at many other companies and could have implications if broader disruptions occur.
From a cash-flow standpoint, Oppenheimer projects Tesla will be free cash flow negative in 2026 as the company supports ongoing factory construction and related investments. The firm also anticipates Tesla may pursue off-balance-sheet options for its Cybercab fleet as that business line begins to generate revenue.
Despite those projections, InvestingPro data indicate Tesla carries more cash than debt on its balance sheet and retains solid liquidity, with a reported current ratio of 2.07. InvestingPro's Fair Value analysis nonetheless suggests the company appears overvalued at present. Over the past six months Tesla has returned 34.33% in price performance, according to the same dataset.
In earnings and market reactions, Tesla reported fourth-quarter revenue of $25 billion and earnings per share of $0.50, results that were close to consensus estimates of $25.1 billion in revenue and $0.45 in EPS. The company's automotive gross margin excluding regulatory credits rose to 17.9% for the quarter - a 250 basis point improvement from the prior period - which Oppenheimer and market analysts attributed to a more favorable sales mix and pricing actions.
Following the earnings release and public disclosures about capital plans, a number of other brokerages updated their views. Mizuho raised its price target for Tesla to $540 from $530 while maintaining an Outperform rating. UBS increased its price target to $352 from $307 and cited Tesla's plans to roughly double capital expenditures to approximately $20 billion by 2026 to support its AI ambitions.
Canaccord Genuity adjusted its price target to $520 from $551 while keeping a Buy rating and said it was recalibrating its valuation model based on revised earnings forecasts. Barclays reiterated an Equalweight rating with a $360 price target as Tesla announced plans to phase out its Model S and Model X vehicles by next quarter. Goldman Sachs lowered its price target to $405 from $420 while maintaining a Neutral rating as Tesla shifts more resources toward AI initiatives.
Oppenheimer's commentary underscores the balance Tesla is attempting to strike between investing heavily in new AI-driven products and managing near-term financial metrics. The firm's expectation of negative free cash flow in 2026 and the potential use of off-balance-sheet structures for new revenue-generating fleets are notable parts of its forward-looking assessment.
Length and focus of program: Oppenheimer stresses that Tesla's supply chain and product rollouts will take multiple years to fully implement.
Liquidity and valuation snapshot: InvestingPro data show more cash than debt, a current ratio of 2.07, and a Fair Value analysis that indicates Tesla appears overvalued; the stock has delivered a 34.33% return over six months.
Earnings and analyst reactions: Q4 revenue of $25 billion and EPS of $0.50 were roughly in line with consensus, automotive gross margin excluding credits rose to 17.9% (up 250 basis points), and several brokers adjusted price targets and ratings following results and capex guidance.