The long-running debate over whether Tesla should be valued as a traditional automaker or a technology powerhouse edged closer to an answer this week after the company unveiled plans to significantly reconfigure its factory operations.
That announcement led both bullish and bearish Wall Street analysts to converge on a rare point of agreement: Tesla is not an auto stock.
While analysts differ on how they reach that conclusion, a growing consensus suggests that Tesla’s auto manufacturing business alone cannot justify its enormous $1.56 trillion market capitalization. By comparison, legacy Detroit automakers General Motors Co. and Ford Motor Co. are valued at roughly $78 billion and $56 billion, respectively.
“If it wasn’t already obvious, it is now abundantly clear that Tesla is not an auto company,” Barclays analyst Dan Levy wrote in a note to clients.
Speaking on Wednesday’s earnings call, Chief Executive Officer Elon Musk said Tesla will discontinue production of its premium Model S and Model X vehicles. At the same time, the company plans to invest $20 billion in initiatives such as autonomous driving, robotics and energy storage.
“While Automotive remains Tesla’s core business for now, we believe the end of S/X represents a symbolic handoff from Automotive to Physical AI, with autonomy — including robotaxis and full self-driving — and robotics becoming Tesla’s primary growth engines in the years ahead,” Levy said. He maintains an equal-weight rating on the stock with a $360 price target, well below Thursday’s closing price of $416.56.
Tesla shares rose in after-hours trading Thursday following reports that SpaceX is exploring a potential merger with Tesla, as well as an alternative combination with artificial intelligence firm xAI.
Canaccord Genuity analyst George Gianarikas, who has a buy rating and a $520 price target on Tesla, said investors should reassess their understanding of the company. “This quarter’s earnings call read like a manifesto for ‘amazing abundance,’ signaling a sweeping reallocation of Tesla’s industrial focus toward autonomous systems, humanoid robotics and a fully integrated clean-energy ecosystem.”
Andrew Rocco of Zacks Investment Research described the quarter as marking a definitive “shift from an EV manufacturer to an all-in bet on robotaxis, energy and Optimus.”
Tesla’s leadership emphasized that its ambitions extend beyond vehicle sales. Lars Moravy, vice president of vehicle engineering, said the company is increasingly focused on offering transportation-as-a-service, rather than simply addressing demand for individually owned vehicles.
Struggling Auto Business
Despite this strategic pivot, Tesla’s automotive segment accounted for approximately 87% of total revenue in 2025, according to Bloomberg data, even as vehicle sales slow and analysts cut profit forecasts. Musk’s trillion-dollar compensation package also remains tied to performance targets that include vehicle delivery milestones.
At the same time, widespread commercial deployment of robotaxis and humanoid robots may still be years away.
Some analysts argue that Tesla’s valuation fails to adequately account for these risks, making the stock a persistent flashpoint among investors. Tesla currently trades at roughly 194 times forward earnings — more than six times the average multiple of the so-called Magnificent Seven technology stocks.
JPMorgan Chase analyst Ryan Brinkman, who lowered his price target to $145 from $150 while maintaining a sell-equivalent rating, urged “extreme caution” following the earnings release.
Tesla’s “aggressive and unexpected outlook for more than doubling capital expenditures in 2026, without committing to delivery growth, leads us to remove any expectation of positive free cash flow in both 2026 and 2027,” Brinkman wrote.