By Tesla stock (NASDAQ: TSLA) is slipping as investors question the company’s profitability, but a court victory in South Korea has removed one legal headache from Elon Musk’s autonomous-driving ambitions.
The stock closed 0.8% lower at $404.22 and was indicated around $401 in overnight trading.
On Thursday, the Seoul Central District Court dismissed a lawsuit seeking refunds for Tesla’s Full Self-Driving software, ruling that the company had not promised fully autonomous vehicles.
Why the South Korean ruling matters for Tesla stock
The owners argued that they had paid for self-driving capabilities Tesla had failed to deliver. The court disagreed, finding that Full Self-Driving, or FSD, did not guarantee Level 5 autonomy, where a vehicle operates without human intervention.
Judges said Tesla had supplied some contracted features, including Autopilot functions, and that additional capabilities depended on technological advances and regulatory approvals.
The verdict removes an immediate refund threat in South Korea, but does not establish that Tesla has achieved fully autonomous driving. Nor does it decide similar disputes elsewhere.
That distinction matters to shareholders because Musk increasingly pitches Tesla as a software and robotics company, rather than simply a carmaker.
“It is clear that FSD is increasingly driving vehicle purchase decisions,” Morgan Stanley analyst Andrew Percoco said in comments reported by TheStreet.
Percoco maintained an Equal-weight rating and a $410 target. His assessment preceded the ruling, but underlines why defending the commercial appeal of FSD is important to Tesla’s investment case.
Why Wall Street still sees a bullish case
Tesla reported 1.74 million active FSD subscriptions in the third quarter, a 67% increase from a year earlier. More than 75% of new North American deliveries included paid FSD, up from roughly 55% in the previous quarter.
Those figures suggest drivers are becoming more willing to pay for software, potentially providing recurring revenue beyond the initial vehicle sale and strengthening margins over time. Tesla also says its robotaxi fleet is expanding.
Barclays upgraded Tesla to Overweight from Equal Weight on Monday and raised its price target to $450 from $370.
Analyst Dan Levy said improvements in Tesla’s vehicle business, robotaxi progress and a possible combination with SpaceX “offers attractive risk/reward for the stock”, according to Yahoo Finance.
Tesla stock: Legal victory cannot repair Tesla’s margins
Tesla’s third-quarter revenue edged down to $28.05 billion, while operating profit plunged nearly 56% to $718 million. Its operating margin slipped to about 2.6%, reflecting heavier spending on AI, robotics and new products.
Capital expenditure reached approximately $4.7 billion during the quarter, even as investors awaited clearer evidence that robotaxis could deliver significant profits. Free cash flow also slipped to $1.5 billion from $4 billion, underscoring the spending burden.
Hargreaves Lansdown analyst Matt Britzman warned on October 22 that “a valuation propped up by hope rather than earnings is inherently fragile.”
He expects meaningful financial benefits from autonomy to remain at least two to three years away.
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