Tesla’s Stock Down 50%, And There Is Still More Trouble Ahead

Tesla (NASDAQ:TSLA) stock looks relatively expensive – making it an expensive pick to buy at its current price of around $250. There are just too many risks for Tesla at this point. The U.S.’s imposition of tariffs on all imports threatens to push the economy into recession, while the escalating trade spat between the U.S. and China, and the brand damage stemming from CEO Elon Musk’s political plunge could hurt Tesla further. Tesla stock remains down by about 47% from the highs seen in December 2024, and there’s scope for further declines, given that Tesla stock has typically fared worse than the broader markets during downturns. Case in point, during the 2022 inflation shock, Tesla stock erased 73.6% of its value versus a peak-to-trough decline of 25.4% for the S&P 500. So, there could be more downside in store for the stock.

Tesla’s deliveries have been trending lower. The company reported 336,681 vehicle deliveries in the first quarter of 2025, a 13% decline from a year ago. Things could only get worse in the coming months.  The trade war with China has been mounting, with President Donald Trump raising the tariff on Chinese imports to 125%, while China boosted the duty on American goods to 84%. Sure, Tesla manufactures the vehicles it sells in China at its Shanghai facilities, but potential anti-American sentiment and Elon Musk’s close ties to President Trump could hurt sales further. China accounted for 21% of Tesla’s revenue last year. Tesla has invested in a sizable capacity in China, with its Shanghai factory capable of producing over 950,000 vehicles per year – more than half the company’s shipments in 2024. Lower sales and utilization of these facilities could impact margins. Competition in China has been heating up with domestic automakers seeing sales surge driven by sophisticated yet well-priced vehicles.

Things could be more mixed in the U.S. While Tesla stands to benefit from the launch of its Robotaxi in Austin later this year and the refresh of its Model Y, the brand damage caused by Elon Musk’s political push and work in the Trump White House is turning many progressive customers away from the brand. With the new round of tariffs on trading partners,  Tesla has a cost advantage versus its rivals in the U.S., who are more dependent on Mexico for building their vehicles. That said, Tesla, too, sources many parts and materials from suppliers in China and Mexico. This could impact costs to an extent. Things don’t look too good in Europe as well, with Tesla seeing sales fall. Musk was promoting the anti-immigrant far-right AfD party in Germany in February’s elections. Over Q1, Tesla’s total market share in 15 countries in Europe declined to 9.3% in the first quarter from 17.9% in the same period a year earlier, per data from EU-EVs.com.

Tesla’s fundamentals also don’t look appealing relative to its valuation. Our analysis of Tesla along key parameters of Growth, Profitability, Financial Stability, and Downturn Resilience shows that the company has a strong operating performance and financial condition, as detailed below. That said, if you seek upside with lower volatility than individual stocks, the Trefis High-Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception.

How Does Tesla’s Valuation Look vs. The S&P 500?

Going by what you pay per dollar of sales or profit, TSLA stock looks very expensive compared to the broader market.

• Tesla has a price-to-sales (P/S) ratio of 8.9 vs. a figure of 3.2 for the S&P 500
• Additionally, the company’s price-to-operating income (P/EBIT) ratio is 112.7 compared to 24.3 for S&P 500
• And it has a price-to-earnings (P/E) ratio of 122.6 vs. the benchmark’s 24.3

How Have Tesla’s Revenues Grown Over Recent Years?

Tesla’s Revenues have seen some growth over recent years.

• Tesla has seen its top line grow at an average rate of 23.7% over the last 3 years (vs. an increase of 6.3% for the S&P 500)
• Its revenues have grown 0.9% from $97 Bil to $98 Bil in the last 12 months (vs. growth of 5.2% for S&P 500)
• Also, its quarterly revenues grew 2.1% to $26 Bil in the most recent quarter from $25 Bil a year ago (vs. 5.0% improvement for S&P 500)

How Profitable Is Tesla?

Tesla’s profit margins are around the median level for companies in the Trefis coverage universe.

• Tesla’s Operating Income over the last four quarters was $7.8 Bil, which represents a moderate Operating Margin of 7.9% (vs. 13.0% for S&P 500)
• Tesla’s Operating Cash Flow (OCF) over this period was $15 Bil, pointing to a moderate OCF-to-Sales Ratio of 15.3% (vs. 15.7% for S&P 500)

Does Tesla Look Financially Stable?

Tesla’s balance sheet looks very strong.

• Tesla’s Debt figure was $14 Bil at the end of the most recent quarter, while its market capitalization is $811 Bil (as of 4/10/2025). This implies a very strong Debt-to-Equity Ratio of 1.6% (vs. 19.0% for S&P 500). [Note: A lower Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $37 Bil of the $122 Bil in Total Assets for Tesla.  This yields a strong Cash-to-Assets Ratio of 30.0% (vs. 14.8% for S&P 500)

How Resilient Is TSLA Stock During A Downturn?

TSLA stock has fared worse than the benchmark S&P 500 index during some of the recent downturns. Worried about the impact of a market crash on TSLA stock? Our dashboard How Low Can Tesla Stock Go In A Market Crash? has a detailed analysis of how the stock performed during and after previous market crashes.

Inflation Shock (2022)

• TSLA stock fell 73.6% from a high of $409.97 on 4 November 2021 to $108.10 on 3 January 2023, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 11 December 2024
• Since then, the stock has increased to a high of $479.86 on 17 December 2024 and currently trades at around $250

Covid Pandemic (2020)

• TSLA stock fell 60.6% from a high of $61.16 on 19 February 2020 to $24.08 on 18 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 8 June 2020

Putting All The Pieces Together: What It Means For TSLA Stock

In summary, Tesla’s performance across the parameters detailed above are as follows:

• Growth: Strong
• Profitability: Neutral
• Financial Stability: Extremely Strong
• Downturn Resilience: Very Weak
• Overall: Neutral

But given its extremely high valuation, the stock appears relatively expensive, which supports our conclusion that TSLA is an expensive stock to buy.

The rich valuation of TSLA stock limits its upside potential in the near-to-mid term. As an alternative, the Trefis Reinforced Value (RV) Portfolio, has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid-, and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.

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