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Tesla Stock Could Be on Track to Do This for Only the Second Time in 10 Years. (Hint: It's Not a Good Thing)
TeslaTesla(US:TSLA) The Motley Foolยท2025-07-19 08:30

Core Viewpoint - Tesla's stock has declined approximately 21% this year, contrasting with a 7% increase in the S&P 500, indicating a troubling trend for the company amid favorable market conditions [1][2]. Group 1: Company Performance - Tesla has faced significant challenges in recent quarters, with negative press surrounding CEO Elon Musk impacting investor sentiment [2][8]. - The company's quarterly profits are at their lowest in years, affected by reduced discretionary spending and increased competition, which is squeezing gross margins [9]. - In the first three months of this year, Tesla's automotive revenue decreased by 20% year over year, highlighting difficulties in maintaining growth [12]. Group 2: Historical Context - Over the past decade, Tesla has generated returns of around 1,700%, significantly outperforming the S&P 500's 200% increase during the same period [5]. - Historically, Tesla's stock has only experienced a decline of more than 20% in a single year once, which was in 2022 [7]. - The current year may mark the second instance of a decline exceeding 20% in the last ten years if recovery does not occur [7]. Group 3: Valuation and Future Outlook - Tesla's stock trades at approximately 180 times its trailing earnings, with a market capitalization around $1 trillion, indicating high expectations that may not be met [11][12]. - Despite being a leading electric vehicle manufacturer, the high valuation suggests that much of the future growth is already priced in, raising concerns about the sustainability of strong returns [13]. - There is skepticism regarding the stock's recovery this year, with a recommendation to hold off on purchasing shares until the company demonstrates improved business growth and profitability [14].