Tesla (TSLA 2.33%) shares have been on a wild run in the past year. The stock chart resembles a roller coaster ride, driven by just how volatile things have been. The stock benefited tremendously from the market's bullishness following the 2024 presidential election. Then in the first three months of this year, shares plunged back to where they had been before that surge. But since late April, they've climbed slowly back toward their 52-week peak.
The net result of all those ups and downs is that over the last 12 months, the electric vehicle (EV) stock is up by 101% (as of Oct. 20). But what kind of performance can we expect Tesla to deliver over the next year?
Image source: Tesla.
Tesla's business is impacted by external forces
In the past three years, Tesla has cut prices for its various models on multiple occasions in an effort to maintain its market share. Management realized that higher interest rates make buying new cars less affordable for consumers, so they wanted to support demand. Perhaps the next 12 months will be better in this regard.
After cutting its benchmark interest rate by 25 basis points last month, the Federal Reserve is expected to implement two more rate reductions this year. Lower borrowing costs can provide a lift to automotive sales, so this could help Tesla increase revenue.
Another point to consider is that Congress and the president revoked the $7,500 federal EV tax credit with one provision of the "Big Beautiful Bill." Tesla likely benefited from a short-term sales boost in the third quarter as consumers who had been planning an EV purchase rushed to buy before the end of September, when that tax break disappeared.
Now that this major financial incentive is gone and the effective price U.S. consumers will pay for all EVs is that much higher, it will be interesting to see if demand for EVs sinks. This could offset the beneficial impacts on sales that lower market-based interest rates might have.
During the second quarter of 2025, 74% of Tesla's revenue came from its automotive segment. Though many investors are putting more weight on what they expect its business will look like in the future, what matters today is EV sales. Investors will certainly become more bullish about the company if it can return to strong EV revenue growth and improve its profit margins.
One major potential catalyst
Investors should also pay attention to important company-specific variables. One of the most notable will be how the company's new robotaxi service fares. Tesla launched it with a limited rollout in Austin, Texas, in June, and has since then added public service in the San Francisco Bay area. Markets in Arizona, Nevada, Colorado, and Illinois could see robotaxis next.
How the company's autonomous vehicle technology performs, and how the public feels about it, will obviously be critical. The most important thing is safety. Tesla needs to prove that it can move passengers around without its self-driving cars getting into accidents.
If it can build up a track record of safe operation, that could tip the odds in the company's favor in terms of getting regulatory approval to operate in more markets. If investors see progress on this front, it could certainly push the stock price higher.
NASDAQ: TSLA
Key Data Points
Earnings and valuation both play a part
Over the next six to 12 months, what will really matter to the stock price is market sentiment. Right now, it's clear that investors are high on the company, as its price-to-earnings ratio of 256 is a nosebleed valuation level. That P/E ratio could certainly contract significantly over the next year.
But if Tesla is able to grow its profits, then that could provide support for the stock price. Right now, the analyst community is forecasting that earnings per share (EPS) will fall 29% in 2025, followed by a 42% increase in 2026 that would bring it back to about where it was in 2024.
Taking everything into account, including macroeconomic forces, progress on a wider rollout of its robotaxi service, Tesla's valuation, and its earnings outlook, it's impossible to predict where this EV stock will be trading one year from now. It won't be surprising to see the share price higher than it is today, but it also won't be a shock if it's meaningfully lower.
This remains an extremely volatile stock. Investors should think critically before they consider buying shares.
