Deliveries Beat Expectations but Profit Pressure Remains! JPMorgan: Tesla, Inc. (TSLA.US) Earnings May Accelerate Starting in 2028

Tesla, Inc. (TSLA.US) delivered 486,500 vehicles in the third quarter, beating market consensus by about 5%, but JPMorgan maintained its Neutral rating and $415 price target after the data was released. JPMorgan believes that Tesla, Inc.'s impressive deliveries cannot mask near-term earnings pressure, and that the EPS inflection point will not come until 2028, when it may begin a compound annual growth rate of more than 50%. Investors face a period of margin compression before then. JPMorgan's adjusted EPS forecasts for Tesla, Inc. in 2026 and 2027 are $1.43 and $1.45, respectively, well below Bloomberg consensus of $1.65 and $2.22. Based on the current share price of $354, Tesla, Inc. trades at about 248 times 2026 P/E. JPMorgan had maintained an Underweight rating continuously since October 2023 until upgrading to Neutral in June this yeareven so, this report's near-term earnings expectations remain significantly below the market. Deliveries beat expectations, but energy storage missed Third-quarter deliveries came in about 1% above JPMorgan's estimate and about 5% and 3% above the company-compiled consensus and Bloomberg consensus, respectively. Model 3/Y deliveries were about 478,200 units, 6% above the company-compiled consensus, and were the main contributor to the beat; other models delivered about 8,300 units, above JPMorgan's estimate of 6,500 but below the company-compiled consensus of 11,300. Regional performance diverged markedly. Europe was a bright spot, with FSD already receiving regulatory approval in Croatia, Slovenia and the Czech Republic, while sales in South Korea and Australia rose 15% and 21% year over year, respectivelyJPMorgan views the latter two markets as effective references for demand improvement after FSD activation. However, the EU-wide FSD approval vote has been postponed from the originally scheduled October to December. U.S. market sales fell 26% year over year, but this was mainly due to the high base created by a rush to buy before last year's federal tax credit expired, and the year-over-year pressure will ease significantly from the fourth quarter. The energy storage business missed expectations. Third-quarter deployments were about 13.7 GWh, below JPMorgan's estimate of 15.0 GWh, Bloomberg consensus of 15.3 GWh and the company-compiled consensus of 15.9 GWh, partially offsetting the positive from vehicle deliveries. On Robotaxi, the number of registered Cybercabs in Texas has exceeded 100, while the active fleet remains small, and progress on the FSD v15 release will be a focus of the third-quarter earnings report on October 21. Near-term earnings under pressure: weak gross margins combined with surging expenses JPMorgan maintained its below-consensus EPS forecasts due to weak automotive gross margins and rapidly rising operating expenses. According to its forecasts, Tesla, Inc.'s overall gross margin will be 18% in both 2026 and 2027, only recovering to 20% in 2028. The contraction in EBIT margin is even more pronounced: only 1.3% in 2026, further declining to 1.1% in 2027, and recovering to 3.5% in 2028. Pressure on the expense side comes from two directions. R&D expenses will jump from $6.4 billion in 2025 to $9.6 billion in 2026, and are expected to reach $11.8 billion and $13.4 billion in 2027 and 2028, respectively, reflecting large-scale investment in new businesses such as Robotaxi, Optimus humanoid Siasun Robot&Automation and FSD. Capital expenditure is equally aggressive: an estimated $23.3 billion in 2026, accounting for 21.5% of revenue, and $24 billion and $25 billion in 2027 and 2028, respectively. Large-scale spending directly turns free cash flow negative. JPMorgan expects Tesla, Inc.'s free cash flow to plunge from positive $7.2 billion in 2025 to negative $10 billion in 2026, and negative $11.9 billion and negative $9.5 billion in 2027 and 2028, respectively. The company is expected to accumulate about $30 billion in net debt issuance between 2026 and 2028, and its balance sheet will shift from net cash to net debt. 2028 inflection point and $3.9 trillion long-term vision JPMorgan expects adjusted EPS to jump from $1.45 in 2027 to $2.15 in 2028 (up 48%), then accelerate to $3.50 in 2029 and $6.00 in 2030, corresponding to a compound annual growth rate of more than 50%. The main DRIVE of earnings acceleration is not traditional autosautomotive revenue rises only from $76.9 billion to $91.8 billion between 2026 and 2028but rather the rapid expansion of services revenue (covering FSD subscriptions, the charging network, etc.): from $18.3 billion in 2026 to $37 billion in 2028, reaching $83.6 billion by 2030. On valuation, JPMorgan uses a P/E method and a sum-of-the-parts (SoTP) method with 50% weighting each to arrive at a $415 price target. The P/E method applies a 75 times P/E to 2030 EPS, yielding $354 per share after discounting; the SoTP method lays out a 2035 vision: Robotaxi contributes about $1.58 trillion in market value based on $319 billion in revenue and 5 times EV/Revenue, Optimus humanoid Siasun Robot&Automation contributes $705 billion based on $47 billion in revenue and 15 times valuation, and high-margin businesses such as FSD subscriptions and AI compute licensing together contribute more than $1 trillion, implying an overall enterprise value of about $3.9 trillion, or $476 per share after discounting. However, JPMorgan notes that these new addressable markets are unlikely to see a substantial inflection point before 2029. Before the $3.9 trillion long-term vision is realized, the share price trend will depend more on milestone progress in Robotaxi and Optimus, while large AI-related IPOs may divert capital during this period. Among downside risks, JPMorgan mentions the potential brand damage from the CEO's involvement in political activities, as well as execution and regulatory uncertainty around Robotaxi and Optimus. This article is reprinted from "Wall Street CN", author: Gao Zhimou; GMTEight editor: Yan Wencai.