Investors holding Tesla (NASDAQ: TSLA) stock were laughing teacakes — or at least mince pies — at Christmas. Shares of the electric vehicle (EV) pioneer were up by a whopping 227% in two years — and 116% in just two months!
Yet the wheels have come off, so to speak. As I write, the stock is down 42% since Christmas Eve, meaning a £10,000 investment made then is now worth just £5,800 on paper. Bah, humbug!
But is this merely a chance to consider investing in Tesla at a massive discount? Let’s dig in to some details.
Fork in the road moment
Tesla has been hit by a whirlwind of challenges in recent months. These include falling sales, rising competition from Chinese rivals, CEO Elon Musk’s political antics, and margin pressure. Global tariffs are a new headache, as they could increase the costs of imported components, potentially raising production expenses.
Yesterday (2 April), the company released worse-than-expected Q1 delivery numbers. Total deliveries came in at 336,681 while it produced 362,615 vehicles. That was against the company’s own compiled analyst consensus for 377,590 deliveries.
This was 13% lower than the same period last year and 32% below Q4 2024 figures. Worryingly, this came even after lower prices and financing incentives. Weak figures like this will surely plant major seeds of doubt in investors’ minds about the direction and valuation of the company.
Analyst Dan Ives of Wedbush Securities, who has long been one of the biggest Tesla bulls on Wall Street, didn’t mince his words. On X, he wrote: “We are not going to look at these numbers with rose coloured glasses…they were a disaster on every metric. Refresh issues but brand crisis key. The time has come for Musk…fork in the road moment for Tesla.”
DOGE speculation
To be fair, Tesla did lose several weeks of production in all four of its factories during the quarter as it upgraded manufacturing lines for the refreshed Model Y SUV. This was the best-selling car model worldwide last year, and Musk thinks it will remains so.
Plus, the energy business remains strong. It deployed 10.4 GWh of energy storage products in the quarter, nearly 160% higher than the year before.
Perhaps surprisingly, the Tesla share price jumped 5.3% yesterday. But this was nothing to do with the numbers and seemingly everything to do with speculation that Musk could soon be done with his stint running the Department of Government Efficiency (DOGE). If so, that would obviously be a positive for shareholders as he refocuses on day-to-day operations at Tesla.
Meanwhile, Dan Ives remains bullish on Tesla’s robotaxi and autonomous vehicle ambitions, valuing the global market opportunity at $1trn.
What about the stock?
Even after its fall from grace, Tesla stock is trading at around 130 times trailing earnings. On a forward-looking basis, that multiple falls to around 100, but that’s still a hefty valuation.
For context, Nvidia‘s price-to-earnings (P/E) ratio is 36. Yet the AI chip leader is expected to grow both revenue and profits above 50% this year — Tesla most certainly isn’t.
Tesla is one of the most unpredictable stocks around, so I certainly wouldn’t bet against it — or Musk — long term. But given the disappointing quarterly numbers here and the sky-high valuation, I think investors should tread carefully.
