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Valued at a market capitalization of $811 billion, Tesla (TSLA) is the largest automobile company globally. While the electric vehicle manufacturer has delivered exponential gains for long-term investors, the stock is down more than 48% from its all-time highs.
TSLA stock remains volatile in 2025 for various reasons. First, it reported a 13% drop in vehicle deliveries in the first quarter after automotive sales fell 8% in Q4 2024. It’s evident that the EV maker is wrestling with macroeconomic headwinds such as market saturation and slower consumer spending, in addition to rising competition.
Moreover, President Donald Trump’s administration recently levied a 25% tariff on automobile and car part imports, which poses disruptions to Tesla’s supply chain. More than a fifth of Tesla’s components come from international markets, making it vulnerable to trade tensions, particularly with China, where 40% of its battery materials originate.
Several countries have implemented or threatened retaliatory tariffs that will increase the cost of Tesla exports and reduce overseas demand. Additionally, Chinese consumers are shifting toward domestic brands like BYD (BYDDY) and Xpeng (XPEV), partly driven by Elon Musk’s political associations.
Investor confidence has also been eroded by questions about Musk’s divided attention across multiple ventures. These factors have prompted analyst downgrades and revised delivery projections.
Elon Musk Remains Optimistic About Tesla
In a recent all-hands meeting, Elon Musk outlined Tesla’s vision beyond sustainable energy to what he calls “sustainable abundance for all.” This broader mission includes Tesla’s core vehicle business, energy products, AI initiatives, and the Optimus humanoid robot program.
Despite current market challenges, Musk emphasized Tesla’s remarkable production milestones. Tesla has delivered 7 million vehicles to date, with expectations to surpass 10 million cumulative vehicles in 2025. The Model Y remains the best-selling car globally for two consecutive years, while the Cybertruck has quickly established dominance in the electric pickup segment.
Musk is particularly bullish on two transformative technologies: autonomous driving and the Optimus humanoid robot. He projected that autonomous vehicles will be “everywhere” within five years, with regulatory approval expected globally. This would fundamentally transform Tesla’s value proposition, as its fleet could operate 10x more efficiently than human-driven cars.
The Optimus robot program appears to be progressing rapidly. According to Musk, Tesla has developed “the most sophisticated humanoid robot on Earth.” The company aims to produce 5,000 Optimus robots in 2024, scaling to 50,000 in 2025, with consumer availability in the second half of 2026. Musk expects Optimus to become “the biggest product of all time by far... 10 times bigger than the next biggest product ever made.”
Energy storage continues to expand significantly, with megapack and powerwall demand being described as “gigantic” and growing. Tesla is also developing one of the world’s most powerful AI training systems with over 50,000 GPUs, which will soon expand to 100,000. Musk emphasizes that Tesla’s track record of innovation and growing product portfolio positions it for substantial growth over the next 3-5 years.
Is TSLA Stock Still Overvalued?
Wall Street expects Tesla’s adjusted earnings to expand from $2.42 per share in 2024 to $9.54 per share in 2029. Comparatively, its free cash flow is projected to improve from $3.58 billion in 2024 to $28.11 billion in 2029.
If the stock is priced at 40x forward earnings, it should trade around $381 in the next five years, indicating an upside potential of 50% from current levels. Out of the 41 analysts covering TSLA stock, 16 recommend “Strong Buy,” three recommend “Moderate Buy,” 12 recommend “Hold,” and 10 recommend “Strong Sell.” The average target price for TSLA stock is $309.31, which is around 24% above the current trading price.
