When hunting for the best stocks to buy, I always like to start my search among the businesses that have taken a big tumble. When trouble emerges, investors have a habit of overreacting, selling off shares in a panic. Yet, in some circumstances, that can create lucrative buying opportunities for long-term investors.
In 2025, few stocks have dominated the headlines like Tesla (NASDAQ:TSLA). The electric vehicle (EV) manufacturer has encountered a host of problems including weak earnings, higher competition, fewer car deliveries, and leadership controversies.
With all of these issues hitting at once, investor uncertainty understandably shot up. And as many growth investors know, combining uncertainty with a lofty valuation is a big way to generate downward volatility. But is the situation really as bad as investors think?
Reasons to be optimistic
Setting aside the recent challenges this business is facing, Tesla’s got a few handy tailwinds starting to fill its sails. The US Department of Transportation has recently begun relaxing regulations surrounding self-driving vehicles. That’s definitely helping pave the way for Tesla’s robotaxi service to take centre stage next year, following the pilot programme that’s kicking off in June.
Meanwhile, the firm still has an impressive competitive edge on the manufacturing side of the equation with technologies such as the Giga Press and superior battery technology. As such, the group’s operating costs are relatively lower versus its leading competitors.
Pairing this with a series of car design revamps in 2025, the recent lull in performance might soon go into reverse gear, sending sales and earnings back into acceleration mode.
What could go wrong?
We’ve already discussed the leading reasons why Tesla shares have taken a big hit this year. However, one that deserves further elaboration is competition. A big barrier to entry for customers to switch to EVs from traditional ICE cars is the cost.
For years, CEO Elon Musk’s been promising an affordable Tesla EV priced around the $25,000 mark, known as the Model Q. And as per the latest announcements, the car’s scheduled for launch in the first half of this year. That’s a critical milestone for the company to hit.
Why? Because competing EV manufacturers in China, like BYD, have already launched their affordable EV options and have subsequently become the fastest-selling vehicles in China, stealing a large chunk of Tesla’s market share.
While US tariffs are keeping these competitors at bay in America, such protections aren’t as powerful in other core markets like the EU, where tariffs are much lower. Needless to say, another round of market share losses doesn’t bode well for the business.
Time to buy?
All things considered, Tesla as a business continues to look promising, in my eyes. The company has a lot of promising technology and the resources necessary to deploy and execute its long-term strategy. However, it’s worth pointing out that even after falling by as much as 40% this year, the stock’s still trading at a forward price-to-earnings ratio of 130!
Such a premium valuation is too demanding for Tesla to be a good stock to consider right now, I feel. As such, while I like the company, I remain unconvinced about the stock. Perhaps it’s best for investors to consider keeping this one on their watchlists for now.
