Tesla (TSLA 2.60%) is one of the best-performing stocks of the last 10 years, up close to 2,000% for shareholders and crushing the broad market averages. The last three years have been more painful. Still up 40%, Tesla has trailed the Nasdaq 100 Index's 88% cumulative return in the last three years, with struggles hitting the leader in electric vehicles (EVs) because of market share losses, shrinking margins, and recent product flops.
Down around 14% this year, investors are beginning to doubt Elon Musk and Tesla stock again. This should have contrarian investors perked up at a potential buying opportunity as most shy away from the once winning stock. Would buying Tesla stock be the smartest decision you make this year to bet against these doubters? Let's dig into the numbers and investigate further.
NASDAQ: TSLA
Key Data Points
Declining car volumes
The bulk of Tesla's past stock performance has come from the growth of its EV division. Pioneering the industry, Tesla dominated new EV sales for a few years with its Model 3 and Y concepts, leading revenue to come close to $100 billion and operating income to soar past $10 billion. Now, these figures are all moving in the wrong direction.
Last quarter, Tesla's total EV deliveries fell 13% year over year to 337,000, a trend that has occurred for many quarters now. Combined with falling selling prices, Tesla's automotive sales fell 20%, and total income from operations fell 66% year over year last quarter, wiping out a ton of Tesla's prior profitability.
Over the last 12 months, Tesla posted $7 billion in operating income, down 50% from all-time highs. Trends in demand across China, Europe, and the United States seem to point to continued declines as well, with delivery estimates falling and used Tesla prices dipping while average used car prices rise, a forward indicator of demand for an automotive brand. Overall, Tesla's EV business is in a terrible spot in 2025, which is why investors are beginning to doubt the stock again.
Image source: Getty Images.
Will robotaxis save the company?
Tesla is more than just EV sales, though. At least, that is what CEO Elon Musk claims. The provocative and showman leader of Tesla has been hyping Tesla's developments in self-driving taxis, which means utilizing the cameras/sensors deployed on Tesla vehicles to autonomously drive cars for its customers. In the long run, Tesla hopes to build a self-driving taxi network similar to Waymo, although details are not clear today.
First, Tesla needs to prove that this self-driving technology actually works. Elon Musk originally said it would debut a Tesla robotaxi in Austin on June 12 but has since revised this to June 22 while also claiming that a Tesla robotaxi will take a trip all the way from Austin to Los Angeles as well.
While self-driving cars sounds exciting, Elon Musk has been claiming Tesla's technology is close to ready for a decade now. In 2017, he said a Tesla would drive itself from New York City to Los Angeles, and it never happened. Many critics of Tesla's approach to autonomous driving point to its use of cameras instead of LIDAR technology. Cameras are tricky to operate when there is bad weather.
A robotaxi network has huge economic promise, not to mention a giant value proposition for society in the way of safer roads and automating a boring and time-consuming task. Sign me up. However, we already have a leading, self-driving company: Waymo. The taxi network does 250,000 weekly trips for customers and is growing at a blistering pace. It will take a herculean feat for Tesla to catch up to Waymo.
TSLA PE Ratio data by YCharts.
The truth about Tesla stock
Elon Musk may talk to the moon and back about Tesla's upcoming products that will take the stock to new heights. The reality on the ground is much different. The Cybertruck is a flop and burning money for the company, Optimus robots are years away from deployment, and self-driving technology has been a false promise for close to a decade.
At the moment, Tesla is an EV manufacturer with falling sales, declining margins, and increasing competition globally. Its stock is not cheap either. At a trillion-dollar market cap, Tesla has a price-to-earnings (P/E) ratio of 178, which is pricing in huge earnings growth for the company when its earnings are currently moving in the completely wrong direction. This presents even more risk for shareholders today.
Buying Tesla stock would not be a smart decision for investors this year. Its shares are overvalued and have major downside risk from here.
