Tesla Has Crashed 35% in 2025: Is It Time to Buy the Stock?
But the top electric vehicle (EV) maker's revenue and adjusted earnings per share missed Wall Street estimates. The company continues to struggle with a wide range of issues that have been worrying investors.
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With Tesla trading significantly below its peak, and while there continues to be pessimism surrounding the business, is now the time to buy the stock?
Starting off slow
Considering the amount of uncertainty there is about the economic backdrop, with a focus on President Donald Trump's tariff policies, it might not be that surprising that Tesla got off to a slow start to 2025. However, I don't think anyone could've predicted a troubling 9% year-over-year revenue drop in Q1. Automotive sales fared even worse, down 20%.
Tesla revamped all four of its factories that produce the model Y to properly equip them for the refreshed design. That was part of the reason EV deliveries fell 13% compared to the first quarter of 2024. The leadership team also called out lower average selling prices that were caused by pricing incentives. Competition also can't be ignored here.
Weakness on the top line had a negative impact on Tesla's profitability, with operating income tanking 66%. For Q1, the business reported an operating margin of just 2.1%.
Looking ahead, investors are in the dark as Tesla didn't provide guidance for the current quarter. "It is difficult to measure the impacts of shifting global trade policy on the automotive and energy supply chains, our cost structure, and demand for durable goods and related services," the Q1 2025 investor presentation reads.
Robotaxi promises
On the Q1 2025 earnings call, Wall Street analysts asked the management team to provide more details about Tesla's robotaxi product roadmap. The company is still on track to launch its robotaxi service in Austin, Texas in June, which will operate with the model Y. And there are plans to introduce this in other U.S. cities before the end of the year.
What's more, Tesla is aiming for the Cybercab to begin volume production in 2026. These two-seater vehicles are designed specifically for robotaxi service, as they will be built without a steering wheel or pedals.
Founder and CEO Elon Musk didn't shy away from revealing his ambitious targets. He believes that in the U.S. by the end of this year, unsupervised full self-driving capabilities will be available. Adding to the bold commentary, Musk said that autonomy will "move the financial needle in a significant way" in the second half of next year.
Besides autonomous driving, Tesla is hard at work developing Optimus, its humanoid robot. Musk thinks the company can produce 1 million units in the next four to five years.
Expectations remain high
Tesla undoubtedly deserves credit for how innovative and disruptive it has been, and for how much the company continues to push the envelope. But while there have been monster estimates for the total addressable market sizes of both robotaxis and humanoid robots, investors need to view the business clearly today.
It's easy to look at Tesla and become bullish on what the company could become one day. This is a challenged EV maker, however, with declining revenue as well as profitability that's getting crushed. And the stock trades at a forward price-to-earnings ratio of 107. That's extremely expensive based on the current financial situation and state of the business.
Even though shares are taking a hit, investors should avoid Tesla right now.
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