2025 has been a volatile year for Tesla (NASDAQ:TSLA) shares. Having collapsed more than 40% during the first quarter, the electric vehicle manufacturer has since recovered, climbing by roughly 75% since the start of April, undoing its earlier losses and even reaching a new all time high.
For shareholders, this seesaw motion has seen a £5,000 investment at the start of the year grow into roughly £6,160 today, outpacing the wider S&P 500.
But now the question becomes, how much money could investors make by this time next year?
Long-term growth catalysts
There are a lot of factors driving Tesla shares forward. However, looking at the investment theses of institutional analysts, there are three recurring themes that have them excited.
- Autonomous vehicles – In June, Tesla’s robotaxi business began issuing paid rides with testing now under way without front-seat safety monitors, bringing it one step closer towards penetrating the driverless vehicle market.
- Vertical integration – The company continues to leverage the organic cost advantages of its vertically integrated operations.
- Humanoid robotics – While still a long way off, Elon Musk has estimated the addressable market size for Tesla’s Optimus robots to be as large as $10trn.
Isn’t this an EV business?
What’s bizarre is that, despite Tesla being first and foremost an electric vehicle company, there doesn’t seem to be much of an emphasis on the sale of its vehicles. In fact, digging deeper, this part of the business has made quite a few stumbles of late.
While total deliveries are still on the rise, production volumes have started to slip. At the same time, growing levels of competition within the EV space have seen significant market share losses as rivals ramp up their offerings.
In fact, the latest sales data shows that Tesla’s market share in its core US market has just dropped to a new four-year low, despite launching cheaper versions of its best-selling models.
This impact has also bled into the group’s profit margins. Lower-priced models, higher production costs courtesy of tariffs, and aggressive customer incentives have dragged down the group’s average vehicle selling price, compressing profitability.
Looking at the latest results, gross margins have shrunk from 19.8% to 18% year on year, while operating margins have suffered even more, from 10.8% to just 5.8%.
Needless to say, that’s a little concerning and might be an early warning sign that the underlying business could be deteriorating.
So, where does that leave investors?
The bottom line
Despite its currently lacklustre automotive performance, the market appears to be betting big on robotaxis as the new growth engine of this business. And given the company’s data dominance within the automotive sector, it does have a notable upper hand against rivals here.
But this technology is far from proven. And with enormous regulatory hurdles yet to overcome, buying Tesla shares today feels more like speculation than a sound investment, especially with a forward price-to-earnings ratio of 208.3.
A growing number of institutional analysts seem to be coming to a similar conclusion with share price target cuts and rating adjustments. The result of all this puts the average consensus at around $413 per share, suggesting that a £5,000 investment today could actually shrink to £4,420.
With that in mind, I think there are far better stock market opportunities to explore for 2026.
