Wolfe Research reiterates Peerperform on Tesla stock By Investing.com

Wolfe Research raised Tesla’s 2026 EPS estimate to $1.89 from $1.62 and boosted its 2026 automotive gross margin forecast ex-credits to 16.7% from 15.0%, but cut 2027 EPS to $2.04 from $2.17 and still sees both years below consensus. Delivery expectations were lifted by about 15,000 units to 1.69 million for 2026, while full self-driving subscriptions are projected to rise roughly 50% year over year to 1.7 million. The article also notes mixed operating signals from weaker Portugal registrations and a slight decline in weekly China orders.

Analysis

The key takeaway is not the headline estimate changes, but the widening dispersion between near-term operating leverage and longer-dated capital intensity. If autonomy/software adoption continues to inflect, the market will reward the “asset-light software” narrative; if not, incremental spend on depreciation, compute, and service infrastructure keeps pulling the stock back toward a hardware multiple. That asymmetry matters because the stock is still priced for a far better execution path than the revised outer-year earnings support.

The second-order winner is likely not Tesla itself, but the broader EV supplier ecosystem that can monetize volume stability without absorbing the valuation risk. A modestly better delivery path and stronger margins imply less near-term stress on battery, power electronics, and charging-adjacent suppliers, but the competitive pressure in China remains the bigger underappreciated issue: pricing intensity can force global margin giveaways even if U.S. demand is stable. That makes regional mix more important than unit growth; a few points of mix shift can overwhelm headline delivery improvement.

For the market, the most important catalyst is whether software monetization can offset hardware dilution over the next 2-4 quarters. If subscription growth decelerates or regulatory friction slows autonomy rollout, the multiple likely compresses before earnings revisions fully reflect it. Conversely, a single strong autonomy or paid-feature update could re-rate the name quickly because the equity still trades as though software optionality is almost fully realized.

The contrarian view is that the recent move may be underdiscussing the downside of optimism fatigue: every incremental improvement now has to overcome an extremely rich valuation and a more skeptical sell-side backdrop. That means the stock can go up on good numbers, but sustained outperformance likely requires proof of monetization, not just better deliveries. Without that, rallies are vulnerable to fading into earnings-season as estimate revisions stop moving higher.

Key Decisions for Investors

• Stay tactically underweight TSLA into the next earnings window; the risk/reward is skewed against chasing multiple expansion when outer-year earnings are still being revised by cost inflation rather than by durable monetization.
• If trading TSLA, prefer a defined-risk call spread rather than outright long stock: use a 3-6 month upside spread to capture a volatility spike from autonomy headlines while capping downside from valuation compression.
• Pair trade: long a high-quality EV supplier basket vs short TSLA for 2-3 months; the thesis is that supply-chain names can benefit from volume stability without paying the execution premium embedded in TSLA.
• Watch for a reversal trigger in paid software metrics over the next 1-2 quarters; if subscription growth decelerates, add to shorts on any post-earnings strength because the market is overvaluing optionality.
• Avoid shorting on headline delivery noise alone; only press bearish exposure if margin gains fail to translate into upward revisions for 2026-2027, since the stock will likely ignore weak regional prints until the software narrative cracks.