Tesla Stock Rises. Be ‘Cautious’ After Gains.

Coming into Tuesday trading, Tesla stock was down about 14% so far this year, but up about 63% over the past 12 months. (Prakash Singh/Bloomberg)

Tesla stock took a breather, for a moment, before rising again on Tuesday, making it three strong days in a row.

One analyst recommends caution after the recent run.

Shares of the electric-vehicle maker opened in the red, but quickly recovered for a daily gain of 1.5%. Shares closed at $351.67, the highest close since late May. The S&P 500 and Dow Jones Industrial Average rose 0.4% and 0.3%, respectively.

Tesla stock rose 1.9% on Monday after Friday’s 6.2% gain. That leap upward came as most stocks rallied following Federal Reserve Chair Jerome Powell’s Jackson Hole speech, which the market interpreted as ensuring more interest-rate cuts in 2025.

On Tuesday, Baird analyst Ben Kallo reiterated what he called his “cautious stance” on shares after the run, saying estimates for its financial performance are too high.” He called the setup for shares tricky in a research report. Investors are clearly focused on the future, but the performance of the car business is struggling.

“The relative lack of emphasis paid to fundamentals over the last several quarters indicates investors are more willing to wait for the longer-term opportunities regarding robotaxi [and Optimus humanoid robots],” added the analyst. “Acknowledging the increased patience, we remain cautious with volume and financial estimates for second-half 2025 too high, and the Automotive business continuing to show signs of weakness.”

Kallo is concerned about losing the $7,500 federal tax credits and lower sales of zero-emission vehicle credits, both of which are a function of changing policies in Washington. He expects Tesla to earn about $1.68 and $2.12 a share in 2025 and 2026, respectively. Wall Street expects about $1.70 and $2.44, according to FactSet.

Kallo rates shares Hold and has a $320 price target for the stock. The average analyst price target for Tesla shares is about $314.

Tesla’s stock gain on Monday came while the S&P 500 dropped 0.4%. Despite Kallo’s concern, it is possible that traders are feeling better about Tesla stock after shares recently closed above their July highs. Monday’s close was the highest since June 23, the day following the launch of the EV maker’s self-driving taxi service in Austin, Texas.

The launch was significant for the company. Bullish Tesla investors believe AI-trained robo-taxis will usher in a new era of earnings growth for the car company.

Tesla shares rose almost 50% between its Oct. 10 robo-taxi event in Hollywood, Calif., and the launch of the service. Since the launch, shares have fluctuated as investors have waited for another factor to take them higher.

Expanding the robo-taxi service to more cities could do that. That hasn’t happened yet, but traders might be anticipating the company’s next move.

Coming into Tuesday trading, Tesla stock was down about 14% so far this year, but up about 63% over the past 12 months.

Write to Al Root at allen.root@dowjones.com