Tesla (TSLA +2.71%) is without a doubt a top-performing stock. In the past decade, it has returned an impressive 1,760%, crushing the market along the way.
But this popular electric vehicle (EV) stock hasn't taken investors on a smooth ride. As of July 23, shares trade 31% below their peak from December 2024. The market clearly isn't happy with how the business has been performing, with slower growth and declining profitability the new normal.
Nonetheless, the stock is a historical winner. So, should you buy Tesla right now?
Image source: Tesla.
Latest trends paint a disappointing picture
During the three-month period that ended June 30 (second-quarter 2025), Tesla disappointed investors with financial metrics that came in below Wall Street expectations. Revenue declined 12% year over year to $22.5 billion, while adjusted earnings per share dipped 23% to $0.40. The stock was down more than 4% in the after hours.
The top line was negatively affected by falling EV deliveries. What's more, average selling prices have been under pressure. The damage that founder and CEO Elon Musk caused to Tesla's brand is also playing a role when it comes to demand. Competition isn't making things easier, which reinforces the need for Tesla to introduce cheaper options to target a wider customer base and boost sales figures.
Investors did get some good news on this front. "We continue to expand our vehicle offering, including first builds of a more affordable model in June, with volume production planned for the second half of 2025," the shareholder presentation reads. This development is especially timely given the elimination of the $7,500 federal EV tax credit that will happen on Sept. 30.
NASDAQ: TSLA
Key Data Points
Tesla's fate rests on autonomous driving
As of this writing on July 23, Tesla shares trade at a price-to-earnings (P/E) ratio of 183. That nosebleed valuation isn't a new development, as this company always seems to sell for a steep multiple. For comparison's sake, Tesla's P/E ratio is more than seven times more expensive than the S&P 500 index. And it's more than three times higher than luxury carmaker Ferrari, which reported a superb operating margin of 30.3% in the first quarter.
Tesla is a story stock, as investors are always believing in Elon Musk's grand vision. Based on the valuation, which is not even remotely rooted in the reality of the business today, the market sees Tesla succeeding with its goal of launching a global robo-taxi platform. Musk thinks this service could see "quasi-infinite" demand.
However, nothing is certain. After years of delays, Tesla finally launched a small robo-taxi test in Austin, Texas in June. There are plans to enter other cities before the end of the year. In fact, Musk went so far as to say that "we will probably have autonomous ride-hailing in probably half the population of the U.S. by the end of the year."
But regulatory hurdles remain, as well as technical challenges. So, investors should temper their expectations. It's also worth highlighting how far Tesla is behind Alphabet's Waymo, which reached 250,000 trips per week domestically in April and offers the service in five U.S. cities, with Miami and Washington, D.C. on the way.
There's no denying that Tesla is one of the most innovative and disruptive companies the world has seen. Its progress thus far in artificial intelligence and robotics proves this, not to mention how the business completely spurred the advancement of EVs to more customers worldwide.
But what Tesla will look like five or 10 years down the road is anyone's guess. It could look the same as it does today, or it could be running a thriving robo-taxi service that rakes in monster profits. Based on the current valuation, though, the downside risk is substantial. Investors might want to think twice before buying the stock.
