Is Tesla Stock a Buy, Sell, or Hold for 2025?

Tesla (TSLA) stock saw an impressive 62.5% increase in 2024, driven by a strong year-end rally and growing optimism about the company’s prospects. One of the major catalysts for this surge has been CEO Elon Musk's support for President-elect Donald Trump, sparking speculation that the new administration could bring a favorable regulatory environment for Tesla.

Investors are excited about the potential relaxation of regulations regarding autonomous driving technologies. This has fueled hopes that Tesla’s ambitious plans for self-driving vehicles, including the much-discussed robotaxi fleet, could gain momentum faster than expected.

Despite these developments, 2025 didn’t start positively for Tesla. The electric vehicle maker reported a first-ever drop in annual vehicle deliveries, a notable setback for the company. In 2024, Tesla delivered 1.79 million vehicles, a decrease of 1.1% from the previous year, and missed Wall Street’s expectations of 1.806 million units. The fourth quarter was underwhelming, with Tesla delivering 495,570 vehicles, falling short of the anticipated 504,770 units.

Several factors contributed to this underperformance, including weaker demand in Europe, the rising popularity of affordable hybrid vehicles, and the intensifying competition in the global EV market.

Notably, the broader narrative around Tesla remains largely optimistic in the long term. Investors cheer the company’s expansion into autonomous driving technology, energy storage, humanoid robotics, and chip development. These initiatives show that Tesla is striving to be more than just an automaker, positioning itself as a leader in the next generation of technology.

However, it’s important to remember that Tesla's core business is, and likely will remain for the foreseeable future, its vehicle sales. While the company’s futuristic ambitions are exciting, the majority of its profits still come from selling cars, making it crucial for investors to keep an eye on its performance in the automotive sector. Let’s take a closer look.

What to Expect from Tesla in 2025

Despite the recent setback, Tesla’s automotive revenue in 2025 could see a boost as the company is on track to deliver more affordable models starting in the first half of 2025. Given the expected launch, Tesla’s management expects vehicle deliveries to grow by 20% to 30%. This increase in volumes could support its top line. However, the broader trends in the electric vehicle (EV) market have been soft, which could present some challenges.

Tesla stock could get a boost as more details and developments emerge about its Cybercab, also known as the Robotaxi. Notably, Tesla plans to start producing its Cybercab in 2026. This could be a key growth driver, as Tesla expects to make at least 2 million units annually, potentially reaching 4 million in the long term. 

A key factor supporting Tesla’s financial performance will be its automotive margins. Higher production, increased delivery volume, and more localized shipping could help support margins. While Tesla’s margins are currently higher than its competitors, maintaining this momentum will be a challenge. Although lower cost of goods sold (COGS) could support margins, the company’s focus on offering discounts to stimulate sales might strain profitability in the face of a challenging economic environment.

While Tesla faces some uncertainty in the EV market, Tesla's energy storage business is also performing well, which will likely support its financials in 2025. In the third quarter of 2024, the company’s energy division posted a record gross margin of 30.5%, despite declining Megapack volumes. Additionally, Tesla’s Powerwall saw another quarter of record deployments, marking the second consecutive period of growth. As the company expands its energy storage products and grows its vehicle fleet, Tesla is poised for continued growth in this profitable segment.

The Bottom Line on TSLA Stock 

Tesla reported several promising developments during the last quarter. The company saw improvements in automotive margins, a rise in the take rate for its Full Self-Driving (FSD) technology, and strong profits from its energy business. Moreover, vehicle deliveries are expected to improve in 2025, with Tesla forecasting a 20%-30% increase in deliveries.

However, there are challenges. Increased competition in the EV market and price cuts could continue to pressure Tesla’s margins. While the company’s plans to launch more affordable vehicles could drive volumes, the rise of hybrid models could remain a drag. Moreover, Tesla stock is expensive on the valuation front. The stock is trading 138.8 times its projected 2025 earnings of $2.84 per share, which could limit the short-term upside potential.

Wall Street analysts maintain a “Hold” consensus rating on Tesla, implying much of the growth potential is already priced into the stock.

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