Tesla Stock Just Reported Record Free Cash Flow. Does That Make TSLA a Buy for November 2025?
Tesla’s (TSLA) third-quarter earnings report contained an interesting nugget—free cash flow jumped to nearly $4 billion, a record for the company. In comparison, free cash flow in the second quarter was only $146 million, whereas in Q3 2024, it was $2.7 billion. So, $4 billion represented a significant increase.
TSLA stock is down 1.3% in the last week following the company’s Oct. 22 earnings report. Should the EV company be on your buy list today?
Now located in Austin, Texas, Tesla is a member of the “Magnificent Seven” cadre of stocks that represent seven of the most influential tech companies in the stock market. Tesla has a market capitalization of $1.5 trillion, ranking it in the top 10 in the world among publicly traded companies.
Shares are up 10% so far this year, showing some life in recent weeks after several months of disappointment. But TSLA stock still trails the S&P 500 Index ($SPX), which is up 17% on the year.
One thing that stands out, however, is Tesla’s incredibly high valuation. The trailing price-to-earnings (P/E) ratio is 259, with the forward P/E being 172. Considering both of those figures were below 80 last year, there are a lot of expectations baked into Tesla stock.
Tesla’s earnings report for the third quarter was a mixed bag. In addition to the record free cash flow, Tesla beat estimates on revenue with $28.10 billion versus estimates of $26.37 billion. But the company’s profit margins plummeted, leaving earnings at just $0.37 per share when analysts expected $0.41 per share.
The biggest driver in Tesla’s profits was the Sept. 30 expiration of a $7,500 federal tax credit for EVs. Customers rushed to get their purchases in under the deadline, driving automotive revenue up 6% to $21.2 billion. Tesla deliveries rose 9% from a year ago to $481,166. But with that tax credit gone, it’s going to be extremely difficult for Tesla to approach those numbers for Q4.
The falling profit margins are also a big red flag. Operating expenses of $3.43 billion rose 50% from a year ago as Tesla pours money into robotaxi technology and its Optimus robots. The company’s operating margin was 5.8%, down from 10.8% a year ago. Gross profits were up only 1% from a year ago—a small number considering revenues were up 12%.
Tesla officials said very little during their analyst call about the company’s autonomous vehicle plans, which is troubling considering that bulls like Wedbush’s Dan Ives have predicted robotaxis are a $1 trillion opportunity for the company.
Instead, there was a lot of discussion about what CEO Elon Musk called his “robot army” and management’s pitch for shareholders to approve a new compensation package that could reach $1 trillion. It was a remarkable moment in the earnings call. Most earnings calls don’t typically include a public campaign for a CEO to get a pay raise. Nor do they tend to refer to proxy advisors as “corporate terrorists.”
“I just don’t feel comfortable building a robot army here, and then being ousted because of some asinine recommendations from (proxy advisors) ISS and Glass Lewis, who have no frigging clue. I mean, those guys are corporate terrorists.” Musk said.
Shareholders are expected to vote on the compensation plan on Nov. 6.
Tesla—and Musk in particular—can be divisive, with people tending to have strong opinions one way or the other. That’s reflected in analyst sentiment for TSLA stock, which is also split. Of 42 analysts covering the stock, 14 call it a “Strong Buy,” and two others call it a “Moderate Buy.” But on the other hand, nine give the stock a “Strong Sell” rating, and the remaining 17 recommend holding.
Price targets are also all over the place. The stock is trading 18% above the mean price target of $377, although the most bullish target of $600 suggests a potential increase of 30%. However, the most bearish target of $120 indicates a 73% collapse is possible.
Regardless of what camp you are in, it’s unlikely that Tesla will continue to see massive free cash flow numbers—those were the result of increased deliveries before the federal tax credit expired. The company’s low profit margins are a concern, and Tesla’s future seems linked to its robotaxi and “robot army” ambitions.
On the date of publication, Patrick Sanders did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com