Gross sales of Tesla (NASDAQ: TSLA) automobiles plummeted within the first half of the yr, with volumes coming in 13% under the identical interval final yr. So, it’d stand to motive that Tesla inventory has had a torrid time of it, too, proper?
Not essentially!
The carmaker’s inventory worth is down 14% to date in 2025. However over the previous yr, it’s up – and never simply by just a little bit.
A 68% achieve implies that Tesla inventory is value barely over two-thirds greater than it was one quick yr in the past.
That represents greater than half of the entire 134% achieve seen over the previous 5 years.
With gross sales falling and earnings set to endure from the top of US tax credit, elevated electrical automobile market competitors, and falling gross sales quantity, can Tesla actually justify its inventory market capitalisation of $1.1trn?
Given the inventory worth, the reply to that query seemingly depends upon who you ask!
The present bull case for Tesla
Wanting on the constructive facet, there may be nonetheless quite a bit to love in regards to the firm.
Certain, first-half gross sales confirmed a nasty decline. However that could possibly be right down to non permanent manufacturing line closures for retooling and the Tesla boss’s high-profile political involvement. As each elements recede into the rear-view mirror, perhaps gross sales can develop.
Vitality technology and storage income confirmed a 7% year-on-year decline in the latest quarter. However the long-term development on this enterprise stays constructive, with the footprint of the tools deployed to this point rising over time. Tesla has a compelling technological functionality on this space.
The corporate says quantity manufacturing of its truck and self-driving taxi is ‘slated’ for 2026 and self-driving taxi trials are ongoing within the US (albeit with a Tesla worker in every automobile).
In different phrases, the core automobile enterprise might rebound from a nasty begin to the yr, energy technology and storage continues to reveal its long-term potential, and new enterprise areas are transferring nearer to commercialisation.
The bear case, at a $1.1trn market cap
Nonetheless, what does all that add as much as by way of an funding case?
A lot of it’s speculative – and, for my part, must be valued accordingly.
The automobile enterprise is big and I do assume that with the proper administration effort it may be returned to gross sales progress. However gross sales are usually not the one difficulty it faces.
Profitability is underneath risk on a number of fronts, from the top of US tax credit to pricing strain rising as rivals supply low-cost fashions to try to construct market share.
The facility technology and storage enterprise has demonstrated robust long-term potential, for my part. At 12% of Tesla’s most up-to-date quarterly income, I don’t see it as a rounding error, however I additionally don’t assume it’s core to the funding case.
I merely see no actual justification for the Tesla inventory worth to have soared over the previous yr. Buying and selling for 201 instances earnings, it appears to be like badly overvalued to me in the mean time. I can’t contact it with a bargepole.
