Despite periods of extreme volatility that would test the conviction of even the most mentally tough investors out there, Tesla (TSLA +3.29%) shares have been a monster winner. In the past decade, they have produced a phenomenal return of 1,800% (as of April 29). This would've turned a $1,000 initial investment into $19,000 today.
By disrupting the automotive industry with its sleek and tech-advanced electric vehicles (EVs), Tesla experienced rapid growth over the years. But as of this writing, this leading EV stock is trading 39% below its peak from December 2024. Investors continue to digest the company's notable slowdown in recent quarters.
Now that shares are well off their record, maybe it's time to take a fresh look at Tesla. Where will the stock be in 10 years?
Tesla's reality
Investors need to accept Tesla for what it is these days, which is a struggling automaker. Automotive revenue dropped 6% in 2024, then fell 20% in Q1 of this year. Lower average selling prices due to buyer incentives, competitive forces, and production delays all had an impact.
These headwinds also negatively affected Tesla's profitability. In 2022, the company posted a stellar 16.8% operating margin. This contracted significantly to 2.1% in the latest quarter.
Tesla deserves credit for spending time and money on developing its manufacturing and supply chain capabilities, an area that it has deep expertise in and advantages in, with a focus here in the U.S. The benefit of this is that the business should be impacted by tariffs less than legacy automakers. That's a positive way to view things.
NASDAQ: TSLA
Key Data Points
Dreaming about an autonomous future
CEO Elon Musk has his attention on the future. His grand vision is for Tesla to launch a robotaxi service on a global stage one day. The first step is to introduce this service in Texas this summer. There are plans to be in more U.S. cities by the end of the year. What's more, management thinks there will be millions of autonomous Tesla EVs on the streets in the second half of 2026.
There will certainly still be consumers who want to buy and own their own EVs. They could generate their own passive income stream by offering their cars on the robotaxi service. Additionally, Tesla could manage its own fleet, raking in potentially high-margin revenue in the process.
It's best to practice caution here, though. Tesla has a track record of overpromising and underdelivering on the timeline of getting to the advanced level of FSD capabilities. Regardless, this hasn't prevented Musk from continuing to make bold claims. He said autonomous EVs will have a major financial impact on the business by late next year. Time will tell whether or not this promised tech breakthrough will happen in a reasonable time frame.
The world is unpredictable
Unless we're dealing with a very stable business that operates in an industry that experiences minimal change and disruption, investors must realize that predicting what a company will look like 10 years from now is extremely difficult to do. The world doesn't lend itself to accurate forecasting.
This is especially true when looking at Tesla. Factors like the adoption rate of EVs, as well as developments with autonomous driving and artificial intelligence, are easy to speculate on. However, no one knows with any level of certainty what things will look like down the road.
Only investors who are extremely bullish on Tesla's long-term prospects should consider buying the stock today. Expectations remain high, with the price-to-earnings ratio sitting at 160 right now. Even though the stock trades 39% below its peak, the valuation implies that the market remains very optimistic about Tesla's ability to rapidly grow net income in the future.
In my opinion, there is zero margin of safety here. Tesla is an innovator and a disruptor, but I'm not confident that the stock can generate market-beating returns over the next decade.
