Tesla, Inc. (TSLA) generated $3.9 billion in free cash flow (FCF) in Q3, representing over 14% of its sales. YTD, its FCF margin was 6.86%, implying that TSLA stock could be over 15% undervalued ($502 per share) if FCF stays strong next year. This article will show why.
TSLA closed at $433.72 as of Friday, October 24, down from its recent peak of $459.46 on October 1 before the Oct. 22 Q3 shareholder deck release.
TSLA stock – last 3 months – Barchart – Oct. 24, 2025
But, based on my FCF margin and FCF yield analysis and estimates, TSLA stock could be worth almost $502 ($501.81) over the next year. Let’s look at this.
Tesla’s revenue rose +11.6% YoY to just over $28 billion ($28.095 b) and was up +24.9% QoQ. This was undoubtedly due to orders flooding in ahead of the $7,500 U.S. tax subsidy that expired at the end of September. For example, auto revenues rose 27.3% QoQ in Q3.
Nevertheless, although Tesla did not discuss its revenue outlook for 2026, analysts remain very optimistic. For example, Seeking Alpha shows that 49 analysts are forecasting an average $110.32 billion, up +15.6% from forecasts of $95.46 billion for this year.
The company also generated strong free cash flow (FCF), $3.99 billion in Q3. That represented 14.2% of its $28.1 billion in Q3 sales. Moreover, its trailing 12-month (TTM) FCF of $6.834 billion represented 7.15% of $95.633 billion in revenue. (TTM stats are from Stock Analysis).
Moreover, Tesla’s FCF margin YTD has been strong. This can be seen from the table on page 4 in its Q3 shareholder deck:
TSLA FCF analysis – data from Q3 Shareholder Deck
It shows that YTD, the FCF margin has been 6.85%. Assuming its Q4 FCF margin can stay at half (50% x 6.85% = 3.425% FCF margin) of this level (to be conservative), and based on analysts’ 2025 forecast of $95.633 billion, it could generate almost $900 million FCF in Q4:
$95.633 b 2025 est. – $69.996 b YTD= $25.637 billion Q4 revenue
$25.637 x 0.03425 FCF margin = $878 million FCF in Q4
That would bring the 2025 FCF $5.675 billion:
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