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Last year was anything but smooth for Tesla (TSLA), as the electric vehicle (EV) giant wrestled with fierce competition, aggressive price cuts, executive shake-ups, and layoffs. Even its much-hyped robotaxi event fell flat, doing little to spark investor excitement. But just when the road ahead seemed dark, a political shift sparked a market rally. President Donald Trump’s reelection sent Tesla’s stock soaring by the year’s end.
With CEO Elon Musk emerging as one of Trump’s most prominent allies and now sitting at the helm of the president’s newly created Department of Government Efficiency, investors are betting big on a regulatory environment that could tilt in Tesla’s favor. Hopes of reduced oversight and business-friendly policies have helped fuel the stock’s rally, even as the company kicked off 2025 on a shaky note with disappointing Q4 delivery figures and lackluster earnings.
Tesla is shifting gears with a new catalyst that could put it back in the fast lane. Recently, the company revealed that in March, Tesla would begin deliveries of its revamped Model Y SUV, known as the Model Y Juniper. With a price tag of $59,990, this upgraded version boasts a sleeker fascia, front and rear light bars, ventilated seats, reclining second-row seats, and faster Wi-Fi, offering a more premium driving experience.
By rolling out these enhancements, Tesla is looking to rev up demand and solidify its position in an increasingly fierce EV market. Tesla is already accepting orders for its new Model Y variant from customers in Canada and Europe, while sales have officially kicked off in China. So, as Tesla works to revitalize its core automotive business while navigating a shifting political and economic landscape, should investors buy, sell, or hold the stock now?
About Tesla Stock
Tesla (TSLA) has cemented its place as the U.S. leader in electric vehicles. But, the company’s vision extends far beyond automobiles. With bold strides into energy storage, automation, and robotics, Tesla is a multi-industry innovator. Since going public in 2010, it has grown at an astonishing pace, now commanding a massive market capitalization of $1.2 trillion, outshining the combined worth of some of the world’s largest legacy automakers.
Despite a rocky 2024, Tesla has turned the tide, fueled by growing investor optimism after Trump’s win. Over the past year, the EV powerhouse has soared an impressive 110%, far outstripping the broad S&P 500 Index’s ($SPX) 22.6% gain. Over the past six months, the stock is up 81%, overshadowing the broader market’s 10.5% gains.
Tesla’s blistering rally over the past year undoubtedly comes with a hefty price tag, making it a tough call for some investors. With the stock trading at a jaw-dropping 140.89 times forward earnings and 13.98 times sales, well above the sector medians, Tesla’s elevated multiples reflect the market’s unwavering optimism about its future.
A Closer Look at Tesla’s Q4 Financials
After disappointing investors with its Q4 and fiscal 2024 vehicle delivery and production figures earlier in January, which fell short of Wall Street’s expectations, Tesla dropped a lighter-than-expected Q4 earnings report on Jan. 29. The company’s total revenue climbed 2% year over year to $25.7 billion, while analysts had called for a $27.1 billion. Adjusted EPS of $0.73 improved by 3% annually but still lagged behind Wall Street’s estimates by roughly 5.1%.
The EV maker’s latest results showcase impressive growth in some areas, with a remarkable 113% year-over-year surge in energy generation and storage revenue, along with a solid 31% annual jump in services revenue. Yet, the company’s core automotive division faced a setback, with revenue dipping 8% to $19.8 billion, down from $21.6 billion registered in the same quarter last year. Adding to the challenges, operating income took a notable 23% year-over-year hit, falling to $1.6 billion.
The company attributed the drop in automotive revenue to reduced average selling prices across its popular Model 3, Model Y, Model S, and Model X lines. While these price cuts are part of Tesla’s strategy to boost sales, they’ve put pressure on revenue, underscoring the trade-off between attracting more buyers and preserving profit margins.
While Tesla refrained from providing any specific guidance for 2025, the company said in its Q4 shareholder deck that “2025 will be a seminal year in Tesla’s history as FSD (Supervised) continues to rapidly improve with the aim of ultimately exceeding human levels of safety.”
This progress will eventually pave the way for an unsupervised Full Self-Driving (FSD) option for customers, alongside the launch of Tesla’s robotaxi service, which is expected to begin later this year in select U.S. regions. In addition, Tesla is continuing to advance the rollout of FSD (Supervised) in Europe and China in 2025.
What Do Analysts Expect for Tesla Stock?
Overall, Wall Street appears skeptical about TSLA stock, maintaining a consensus rating of “Hold.” Of the 38 analysts offering recommendations, 12 advise a “Strong Buy,” two suggest a “Moderate Buy,” 14 give a “Hold,” and the remaining 10 analysts maintain a “Strong Sell.” Even though TSLA is already trading at a premium to its average analyst price target of $326.41, the Street-high target of $550 signals that the stock can still rally as much as 41.4% from current levels.
Tesla’s revamped Model Y certainly sparks excitement with its sleek new design and upgraded features that could capture attention in a highly competitive EV market. Yet, the EV maker’s latest earnings reveal how its push for affordability, aimed at expanding its customer base, has come at the cost of its automotive revenue. While the future seems to remain bright for the Elon Musk-led company thanks to its innovation-driven growth and political support, the challenge of balancing affordability and profitability is real. To that end, investors may want to tread carefully before making any bold moves.
