Tesla (NASDAQ: TSLA) has been one of the most successful stocks over the past 15 years, delivering a staggering 17,430% return since its IPO. However, in a surprising downturn, the stock is now down 42% from its all-time high in 2024, making it one of the worst declines in Tesla’s history.
Elon Musk, the company’s visionary CEO, believes he has a bold solution. In response to an investment analyst on X (formerly Twitter), Musk claimed that Tesla could increase its profits by 1,000% over the next five years. But does this make Tesla a buy-the-dip opportunity, or is caution warranted? Let’s dive into the company’s performance, challenges, and future prospects.
Tesla’s Slowing EV Growth: A Major Concern
Tesla revolutionized the electric vehicle (EV) industry, becoming a global leader and at times achieving a $1 trillion market capitalization. The company expanded from a niche automaker to selling over 1 million vehicles annually worldwide. However, its growth trajectory has slowed significantly.
In 2024, Tesla delivered 1.79 million vehicles, marking a slight decline from 1.81 million in 2023. This break in Tesla’s year-over-year growth trend has raised concerns among investors. The company has been slashing prices to move inventory, leading to declining margins. Gross margin fell to 17.9% in 2024, its lowest level in five years.
Compounding Tesla’s struggles, competitors are thriving. U.S. EV sales grew 15% in Q4 2024, yet Tesla’s market share continues to erode. Chinese rival BYD, which now sells more EVs globally than Tesla, is dominating with lower-priced models. This intense competition has placed additional pressure on Tesla’s pricing and profitability.
The Shift to AI, Humanoid Robots, and Robotaxis
While Tesla’s EV business faces headwinds, Musk has been promoting a new vision for the company. Over the past several quarters, he has emphasized Tesla’s potential in artificial intelligence (AI), humanoid robots, and autonomous ride-hailing (robotaxis).
These futuristic technologies could open massive new revenue streams for Tesla. However, tangible progress remains elusive. Musk has been promising full self-driving robotaxis for years, yet no product has reached the market. The Optimus humanoid robot prototype made its debut in 2024, but it was revealed to be remotely controlled rather than fully autonomous. Meanwhile, the AI sector is becoming increasingly crowded, with Musk’s own xAI Grok language tool competing with industry giants.
Skeptics argue that while these innovations are promising, Tesla has yet to deliver any commercial breakthroughs. Given past delays and missed targets, investors may be hesitant to bank on these new ventures as Tesla’s next growth driver.
Can Tesla’s Profits 10x in Five Years?
Musk’s ambitious claim of a 1,000% profit increase over five years is enticing but raises critical questions. Tesla’s net income has already dropped from $15 billion to $7 billion in just two years. With its EV market share shrinking and new ventures unproven, achieving a tenfold jump in profits seems highly optimistic.
Even if Tesla miraculously reaches $70 billion in annual net income, its valuation would still be relatively high. At today’s $875 billion market cap, this would imply a price-to-earnings (P/E) ratio of 12.5. In comparison, General Motors (NYSE: GM) trades at a P/E of 7.5. This suggests that even under Musk’s best-case scenario, Tesla would remain more expensive than traditional automakers.
Final Thoughts
Tesla’s recent struggles highlight the challenges of sustaining its past success. While Musk’s vision of AI, humanoid robots, and robotaxis is compelling, investors may need more concrete progress before regaining confidence. Whether Tesla can reverse its stock decline and achieve its lofty profit goals remains uncertain, making it a stock to watch closely in the coming years.
