Tesla — the most valuable automaker on Earth — faces serious headwinds ahead of its Q1 2025 earnings report.
A few years ago, analysts and media alike endlessly marveled at Tesla’s meteoric rise in stock price and market capitalization. The company went through two stock splits in August 2020 and August 2022, and its valuation soared to its peak level on December 17, 2024 — when Tesla was ostensibly worth $1.5 trillion, or 6.5 times that of Toyota — but its position has changed dramatically so far this year. In fact, Tesla’s stock value has dropped 45% since reaching that peak, and continues to drop as of mid-day Monday.
At time of writing, Tesla’s share price is $224.51, down from a high point of $479.86 on December 17, 2024.
It’s worth noting that its current $734.25 billion market cap (again, as of mid-day March 10) is far higher than any other automaker. The general sense of the company’s precipitous drop in value in recent weeks has been that investors are reckoning with relatively poor earnings after Tesla posted its first sales decline. Other factors potentially influencing Tesla’s share prices are that it canceled its plans for a more affordable ‘Model 2’, a car priced around $25,000 and aimed to extend the EV maker’s dominance into a more budget-friendly section of the market, and its resulting pivot toward robotaxis and general purpose robotics.
Tesla’s stock surged as a result of October’s announcement, but fully self-driving cars with no supervision have remained tantalizingly out of reach for the better part of a decade, as CEO Elon Musk continues promising investors these cars are on the near horizon. Now, it appears investors are increasingly skeptical of Tesla’s sky-high value relative to its ability to deliver on the ‘Cybercab’ later this year, and continue its long-running momentum of utter dominance in the EV market against rising competition and floundering sales among its core models, as well as the new Cybertruck.
It’s not just because of Musk’s political leanings — though that plays a role.
Tesla’s rocky stock performance since December is predicated on how its actual core business is performing (i.e., not great) as well as investor’s reticence toward its promises of autonomous vehicles, of course. For most of its existence, though, Tesla’s identity and its resulting fortunes have been irrevocably tied to one man: CEO Elon Musk.
That’s cut both ways for the company in recent months, it seems, as Musk threw his considerable cultural clout as well as a (reported) quarter-billion dollars behind President Donald Trump’s 2024 reelection campaign. Ever since, he’s been a prominent figure and close adviser with the administration, with Tesla’s stock price shooting to the moon throughout November and December.
On the other hand, he’s been an equally controversial figure for his role in facilitating sweeping job cuts across the federal government since Trump’s inauguration in January. As a result, activists have organized so-called “Tesla Takedown” protests against the brand at its showrooms and service centers, with the intent of fostering a grassroots movement in staunch opposition to Musk’s activities. Some individuals have gone even farther than just protesting the company, by vandalizing Tesla vehicles and dealerships.
Here in the U.S., it’s unclear — at least until the company’s first-quarter earnings call and beyond — what potential impact these actions are having on Tesla’s sales or its bottom-line. In Europe, monthly sales have been cratering by 60% or more in recent months, lending some credence to the company’s status, at least in the short term, as a “toxic brand”.
However, analysts are also flagging increased market competition as a key reason for Tesla’s recent stock performance. Particularly in Europe, where the electric car market is still gaining sales volume, buyers have more options from which to choose. Chinese automakers have made significant inroads over there, while steep tariffs prevent them from doing the same in the U.S. Over in North America, though, legacy automakers like Ford and General Motors have also been gaining ground on Tesla.
Another investor concern, linked to Musk’s government activities as well as his roles at other firms including SpaceX and Neuralink, is that Tesla’s CEO is not giving the proper amount of time and attention to what is, by a considerable margin, his most valuable company.
Each of these factors likely plays into Tesla’s recent stock drop. While Tesla did refresh the Model 3 and Model Y, its other core models continue to age against the rest of the market, and it remains to be seen whether Tesla’s robotaxi services (and, by extension, further development of its Full Self-Driving software suite) will actually come to fruition later this year.
What we could be seeing here may not necessarily be a referendum on Musk or his actions, so much as it is a recalibration of Tesla’s true valuation among its rival automakers. Its “price-to-earnings ratio” — a gauge of how stocks are valued against how much money the company brings in — is 87, or roughly nine times higher than the average of the next 25 most-valuable automakers, according to according to LSEG Data & Analytics (as reported by Reuters).
We will have another insight into Tesla’s performance in early April, when the company releases its next set of production and delivery figures as well as its first-quarter earnings report. At that point, we’ll have a better idea how the company’s U.S. sales have fared as well as its global performance. If those numbers are stronger than predicted, that could well rally investor confidence in Tesla, and its share price will increase once again.
Tesla’s auto sales and EV charging businesses account for around 90% of its revenue, so if those elements perform well, the company’s overall fortunes should improve as a result. Some more bullish investors are banking on the robotaxi’s imminent arrival this year, in which those models suggest Tesla could see a stratospheric rise in share prices akin to its 2020-2021 rise, when it handily controlled the electric car market with the Model 3 and Model Y.
