Investors will surely struggle to find better-performing stocks than Tesla (TSLA -1.57%). In the last decade, the maker of popular electric vehicles (EVs) has seen its shares skyrocket 1,030% (as of March 4). That performance is much better than the Nasdaq Composite Index overall.

But it hasn't been a rosy picture more recently. This top EV stock is currently 54% below its peak price.

Growth-oriented investors who missed Tesla's long-term returns might be salivating at the opportunity to add the stock to their portfolios at a discount. While this business is great, I don't think you should buy shares.

A true innovator

Tesla's rise in the last 10 years is nothing short of spectacular. The company's founder and CEO, Elon Musk, spearheaded the push toward EVs that had broad appeal worldwide. I don't think it's an overstatement to say that Tesla literally changed the automotive industry with its intense focus on innovation and disruption. Virtually every other car company out there has an EV strategy now.

Tesla reported revenue of $96.8 billion and produced 1.8 million cars in 2023. These figures were astronomically higher than sales of $2 billion and vehicles delivered of 22,477 in 2013. Today, Tesla has a 19% share of the global market for EVs. And this is one of the most widely recognized consumer-facing brands on the face of the planet.

Becoming one of the world's most valuable enterprises in just over 20 years is a truly marvelous accomplishment that should make for a great case study. Because of its monumental success, Tesla has made early shareholders wealthy beyond their wildest dreams.

Lofty expectations

Despite its impressive long-term growth, Tesla has hit a speed bump in the past few quarters. Revenue in the latest quarter increased by just 3% year over year. This was after years of greater than 50% sales gains.

The macroeconomic environment is causing problems for many businesses. In this case, higher interest rates help pressure demand for new cars by making them less affordable for buyers. This is why Tesla continues to implement price cuts to maintain its market share.

There are also red flags on the profitability front. The company's Q4 margins contracted significantly from the fourth quarter of 2022. As a company with large fixed costs, revenue taking a hit will immediately impact the bottom line. We're seeing this play out in Tesla's financials.

Even with the shares well off their all-time highs, I still view the situation as expensive for prospective investors. The stock trades at a forward price-to-earnings ratio of 58.8. That's a ridiculously steep valuation for a business dealing with some major challenges today.

In my opinion, the valuation demonstrates the lofty expectations investors still have regarding Tesla's prospects. Whether it's the promise of a global fleet of autonomous robotaxis, providing clean energy to every home, or launching humanoid robots that transform the manufacturing sector, there are high expectations for this business.

However, as the latest trends have shown, Tesla is a car company at its core. And this means it can't escape being sensitive to macro forces beyond its control. Interest rates, supply chains, consumer confidence, and inflationary pressures will continue to impact the business greatly. The current valuation implies that Tesla operates above all these external factors.

While Tesla deserves all the credit in the world for what it's accomplished thus far, I don't think it makes for a solid investment opportunity right now.