This year has already proven to be quite a roller coaster for investors. After falling nearly 19% in the span of just a few weeks, the S&P 500 recovered almost as quickly as it fell, now hovering just below its peak in February.
Still, that rollercoaster ride pales in comparison to that of Tesla's (TSLA +2.45%) stock. Investors watched shares slide more than 50% from their high near the end of last year through April, before rebounding a whopping 62% and again falling nearly 20%.
NASDAQ: TSLA
Key Data Points
This recovery has been primarily driven by the return of the company's CEO, Elon Musk, whose absence has been widely considered as a major driver of the stock's precipitous decline. Now, however, his disagreement with President Donald Trump's "Big Beautiful Bill" is worrying investors. So, with all of this up and down and its inimitable leader back at the helm, it's a good time to ask: Where will Tesla stock be in five years?
Tesla is a car company first and foremost
There's no denying that Musk has a compelling vision of the future. Robotaxis and personal robots easily capture the imagination. However, it's critical for investors to delineate between what is and what could be. At its core, Tesla is a car company, specifically an electric vehicle (EV) maker; roughly 90% of the company's 2024 revenue came from its EV business.
And from this perspective, Tesla is impressive. As EV competitors like Rivian and Lucid continue to deliver net losses, Tesla has operated in the black since 2020. And when compared to legacy carmaking giants, Tesla's profitability stands out: Despite having about half the sales of Ford or General Motors, Tesla makes more in profit. The stark difference is clear in the chart below.
TSLA Revenue (TTM) data by YCharts.
Tesla is seeing its sales pressured
Now, as impressive as this is, you may notice the direction of Tesla's net income over the last year. In both of the last two quarters, Tesla's net income fell by at least 70% year over year.
This downward trend is reflected in the company's sales as well, although that's hard to make out in the chart because of the scale. Tesla's top-line revenue fell by roughly 9% year over year in two of the last five quarters. In two others, it grew by just over 2%, a rate you might call anemic. That is not the kind of growth you want to see from a company as highly valued as Tesla.
Image source: Getty Images.
While these kinds of trends always have multiple factors driving them, it seems clear that the primary drivers are increasing competition and, more recently, a severely damaged brand. As an early pioneer, Tesla's head start allowed it to quickly capture the bulk of the EV market. That lead is quickly eroding as competitors catch up to -- and in some cases surpass -- Tesla in quality and cost.
The fact is, the market is now filled with advanced EVs from quality companies that are often priced more competitively. This is especially true in China, a crucial market for Tesla, where domestic companies like BYD are outpacing Tesla.
The Musk effect
More recently, Elon Musk's foray into politics has arguably done damage to Tesla's brand. An analysis by Brand Research, which actually quantifies the value of a brand, found that Elon's recent and often controversial time in the political spotlight reduced Tesla's brand value by 26%.
Musk's time at the head of the Department of Government Efficiency (DOGE), his support of German far-right politics, and his general online political antagonism have led to a precipitous sales decline across the globe. April saw a nearly 50% drop in Tesla's E.U. sales year over year. The same month saw a 34% increase in overall EV sales in the E.U.
It seemed for a moment that Musk had learned his lesson. As he announced his return to Tesla and began his exit from the Trump administration, it seemed he wanted to repair his image and step away from "stirring the pot," so to speak.
That was short-lived. Last week, Musk took to X to criticize Trump's bill. The president was not pleased, and the two soon fell into an extremely public spat on their respective social media platforms that quickly turned personal. It escalated to the point that Trump suggested SpaceX's contracts with the government be canceled.
It's clear that the inside track Musk enjoyed with this administration could very well be gone, or at the very least, severely damaged.
The road to 2030
So, where will Tesla stock be in five years? To borrow a phrase from the sports world: That depends on which Tesla shows up -- and for that matter, which Elon Musk. If it is the incredibly innovative, groundbreaking, and pioneering company that helped build the EV market to what it is today, then things will look bright. In this case, Tesla will have achieved full self-driving technology, launched a successful robotaxi enterprise, and made major advancements in its robotics technology.
If it is the stagnant Tesla of the last few years, the Tesla that overpromises and underdelivers, the next five years could be rough for investors. While I think, like most things, the truth is somewhere in the middle, my money is on things leaning heavily toward the latter case. And given the enormous amount of future growth already baked into Tesla stock -- a price-to-earnings ratio of more than 160 while revenue stagnates and earnings fall is not the norm -- I would not recommend this stock.
