Brett Schafer, The Motley Fool
5 min read
In This Article:
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Tesla stock has trailed the market for a few years now.
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Its electric vehicle business is declining.
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The company's new initiatives are risky and have no proven track record of success.
Tesla (NASDAQ: TSLA) is one of the best-performing stocks of the last 10 years, up close to 2,000% for shareholders and crushing the broad market averages. The last three years have been more painful. Still up 40%, Tesla has trailed the Nasdaq 100 Index's 88% cumulative return in the last three years, with struggles hitting the leader in electric vehicles (EVs) because of market share losses, shrinking margins, and recent product flops.
Down around 14% this year, investors are beginning to doubt Elon Musk and Tesla stock again. This should have contrarian investors perked up at a potential buying opportunity as most shy away from the once winning stock. Would buying Tesla stock be the smartest decision you make this year to bet against these doubters? Let's dig into the numbers and investigate further.
The bulk of Tesla's past stock performance has come from the growth of its EV division. Pioneering the industry, Tesla dominated new EV sales for a few years with its Model 3 and Y concepts, leading revenue to come close to $100 billion and operating income to soar past $10 billion. Now, these figures are all moving in the wrong direction.
Last quarter, Tesla's total EV deliveries fell 13% year over year to 337,000, a trend that has occurred for many quarters now. Combined with falling selling prices, Tesla's automotive sales fell 20%, and total income from operations fell 66% year over year last quarter, wiping out a ton of Tesla's prior profitability.
Over the last 12 months, Tesla posted $7 billion in operating income, down 50% from all-time highs. Trends in demand across China, Europe, and the United States seem to point to continued declines as well, with delivery estimates falling and used Tesla prices dipping while average used car prices rise, a forward indicator of demand for an automotive brand. Overall, Tesla's EV business is in a terrible spot in 2025, which is why investors are beginning to doubt the stock again.
Tesla is more than just EV sales, though. At least, that is what CEO Elon Musk claims. The provocative and showman leader of Tesla has been hyping Tesla's developments in self-driving taxis, which means utilizing the cameras/sensors deployed on Tesla vehicles to autonomously drive cars for its customers. In the long run, Tesla hopes to build a self-driving taxi network similar to Waymo, although details are not clear today.
