Electric vehicle (EV) maker and robotaxi company Tesla (TSLA 2.27%) has been on a wild ride since U.S. President Donald Trump got elected. The stock initially rocketed higher, but then sold off intensely, as poor performance in the EV business and the effect of tariffs hit the company hard.
But since April's lows, the stock has rebounded almost 90% and trades close to all-time highs made in late 2024. CEO Elon Musk seems to like what he's seeing and just purchased $1 billion of Tesla stock himself. Is now the time for investors to go all in?
Leaping hurdles from earlier this year
Following Trump's election win last November, Tesla's stock surged. There didn't seem to be any specific reason, other than Musk's ties to Trump and expectations for an easier regulatory landscape for Tesla. But as Musk's work with the Department of Government Efficiency (DOGE) proved to be controversial and his relationship with Trump soured, the "Trump bump" seemed to fade, especially as Tesla's core EV business struggled as well.
Image source: Getty Images.
Tesla reported a disappointing 337,000 deliveries in the first quarter of the year, the lowest number in over two years, and second-quarter deliveries of 384,000 were still down 14% year over year. Competition seems to have caught up with Tesla in certain markets. Tariffs and the upcoming elimination of the $7,500 U.S. federal EV tax credit also presented challenges for the business.
However, it didn't take investors long to look past the poor results in Tesla's core business. Instead, they chose to focus on the company's burgeoning robotaxi business and future humanoid robots. Tesla has done a soft launch of its robotaxi fleet in Austin and San Francisco, and is hoping to soon launch in Phoenix. It's hard to tell how far along the programs are. Media reports have suggested that most, if not all, of Tesla's robotaxis are geofenced with either remote human monitoring or actual safety monitors in vehicles during trips.
But investors are excited by the progress. They also believe that Tesla will be able to build its robotaxi fleet more cheaply than rivals like Waymo. Musk also said that he thinks Tesla could have over a million robotaxis on the road by the end of 2026. However, he's made big calls like this before, only to miss the timeline.
Additionally, Musk's recent purchase of $1 billion of stock -- which comes after Tesla's board of directors just proposed a nearly $1 trillion pay package to Musk over the next decade -- is a clear indicator to Wall Street analysts that the company is moving in the right direction.
"We are becoming more bullish," William Blair analyst Jed Dorsheimer wrote in a recent research note. "This purchase is Musk's first buy since 2020. To us, this sends a strong signal of confidence in the most important part of Tesla's future business, robotaxi."
Barclays analyst Dan Levy said in a recent note that he expects Tesla deliveries to come in at around 465,000 in the third quarter, above consensus estimates of 430,000 and flat year over year.
Should investors go all in?
If Tesla could report deliveries that were flat year over year, that would be a good indicator to the market that the company is shoring up problems it had in the first half of the year. Deliveries in Q1 were down nearly 50% year over year.
However, with the U.S. EV tax credit expiring on Sept. 30, EV makers may see a boost in sales due to people trying to take advantage of the savings before they're gone. So Q3 earnings could be a one-off.
Either way, I still find Tesla's stock to be far too expensive for my taste while it's trading at a forward earnings multiple of roughly 247. In my opinion, investors are baking in too much good news from robotaxis and humanoid robots too fast, making the risk-reward proposition less favorable.
