Tesla stock has surged 86% year-to-date but faces challenges in its core business

From Nasdaq: 2024-12-28 05:17:00

Shares of Tesla (NASDAQ: TSLA) saw a 42% decline in early 2024 but have since surged by 86% year-to-date, hitting a new all-time high. CEO Elon Musk’s support for Donald Trump’s campaign is driving investor optimism about Tesla’s future under the new administration.

Despite the stock’s impressive performance, Tesla’s core business is struggling. EV deliveries dropped by 2.3% in the first three quarters of 2024, signaling the company’s first annual decline since 2011. With EV sales contributing 79% of revenue, this trend raises concerns about Tesla’s growth prospects.

Competition and softening EV demand pose challenges for Tesla, with legacy automakers scaling back on EV investments. The absence of a low-cost EV offering puts Tesla at a disadvantage against manufacturers like BYD, impacting its market competitiveness and growth potential.

Investors are bullish on Tesla’s Full Self-Driving (FSD) software and the upcoming Cybercab autonomous vehicle. The potential of FSD technology to revolutionize Tesla’s business model and unlock significant value is driving optimism among investors and analysts, despite regulatory hurdles.

Tesla stock’s skyrocketing valuation, with a high P/E ratio of 125, raises concerns about its sustainability. Delivery challenges and the lack of clear growth drivers for 2025 suggest that Tesla’s current valuation may not be justified, prompting caution among potential investors awaiting a meaningful correction.



Read more at Nasdaq: Should You Buy Tesla Stock Before Jan. 2?