In a world of inflated tech valuations, Tesla’s is one of the standouts. There’s plenty of potential, but given uncertainty, is Tesla stock a buy or a sell?
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Tesla shareholders approved a pay package for its CEO Elon Musk on 6 November, that could see the world’s richest man awarded $1 trillion worth of Tesla stock if certain milestones are hit. Advocates argue that Musk’s leadership is key to ensuring the company achieves its long-term potential in self-driving cars and robotics, especially as its core electric vehicle business is under pressure. All that considered, is Tesla stock a buy or a sell?
Tesla investors have backed a new pay package for chief executive Elon Musk, effectively making him the worlds first trillionaire.
Tesla stock has been on a rollercoaster ride lately, making investors wonder if now’s the right time to jump in. With Elon Musk’s recently approved $1 trillion pay package and ambitious targets for robotaxis, self-driving tech, and AI, there’s a lot to consider before adding TSLA to your portfolio.
The Current State of Tesla Stock
Tesla shares have been volatile in 2025 currently trading around $430 after gaining about 17% year-to-date. But this masks some serious turbulence – at one point in April, the stock was down over 40% due to tariff concerns.
Tesla, Inc. is upgraded to a ‘buy’ rating as record free cash flow generation signals a potential long-term turning point for shareholders. Q3 2025 revenue growth reversed prior declines and superior profitability metrics strengthen TSLA’s balance sheet despite areas of weakness in EPS and net income.
The company has a current market cap of approximately $1.4 trillion, making it one of the most valuable companies in the world. But is the valuation justified? Let’s dive in.
Musk’s Trillion-Dollar Payday: What It Means for Investors
On November 6th, Tesla shareholders approved a compensation package for Elon Musk that could be worth up to $1 trillion. Yeah, that’s trillion with a “T”! The deal was backed by 75% of shareholders and includes some ambitious milestones:
- Reaching an $8.5 trillion market cap (Tesla is currently at ~$1.4 trillion)
- Delivering 20 million vehicles
- Securing 10 million full self-driving subscriptions
- Deploying 1 million robots
- Launching 1 million robotaxis in commercial operation
- Achieving $400 billion in adjusted EBITDA
If these targets are hit, Musk would receive approximately 425 million shares, giving him around 25% of Tesla’s voting power.
Not everyone’s thrilled though. Norway’s $2 trillion sovereign wealth fund voted against the proposal, citing concerns about “the total size of the award, dilution, and lack of mitigation of key person risk.”
Recent Tesla Performance: Mixed Signals
Tesla’s Q3 2025 results showed some improvement over previous quarters
- Vehicle deliveries: 497,099 (up 7.4% YoY and 29% QoQ)
- Record revenue growth that reversed prior quarters’ declines
- Strong free cash flow generation
But there are concerning indicators too:
- Earnings per share fell 31% to $0.50 (below forecasts of $0.54)
- CFO Vaibhav Taneja revealed tariffs cost the firm over $400 million in the previous quarter
- The delivery surge was likely boosted by the end of Biden-era EV tax credits in the US, which might not continue
Tesla actually delivered more vehicles than it produced in Q3, which is unusual and suggests the company anticipates weaker demand ahead.
Valuation Concerns: Is Tesla Too Expensive?
Tesla’s valuation has always been a hot topic. The company currently trades at:
- P/E ratio of over 300 (compared to Nvidia’s ~60)
- About 17 times sales (compared to EV competitors like Rivian and Lucid trading at 3-7 times sales)
This means Tesla is significantly more expensive than both other tech giants and other EV manufacturers. Morningstar analysts estimate Tesla’s fair value at $300, making the current price of ~$430 about 50% overvalued.
But Tesla bulls argue the premium is justified because of…
The AI and Robotaxi Revolution
Wedbush analyst Daniel Ives recently called Tesla “the most undervalued AI name” in the market and described it as a “physical-AI play.” He has a 12-month price target of $600 for Tesla stock, implying 28% upside.
Here’s why some analysts are so bullish on Tesla’s AI potential:
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Self-driving technology: Tesla has been investing heavily in AI for autonomous driving, potentially giving it a head start in the robotaxi market.
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Expansion plans: The company announced its robotaxi service will roll out in Miami, Dallas, Phoenix, and Las Vegas, with plans to remove safety riders in Austin by year-end.
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Market opportunity: Cathie Wood’s ARK Invest believes robotaxis could be a $10 trillion opportunity, with Tesla positioned to be the biggest winner.
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Manufacturing advantage: Unlike competitors like Waymo (owned by Alphabet), Tesla manufactures its own vehicles, potentially allowing for faster scaling.
Dan Ives believes “the AI valuation is getting unlocked, and we believe the march to an AI driven valuation over the next six to nine months has now begun.”
Competitive Challenges
Despite Tesla’s head start in EVs, competition is intensifying:
- Chinese competitors: BYD and other Chinese manufacturers are offering more affordable alternatives
- Traditional automakers: Ford, GM, and others are ramping up their EV offerings
- Pricing pressure: Tesla has been offering incentives like insurance subsidies and interest-free loans to maintain demand
The company is also dealing with higher costs related to AI and robotics investments and pressure from expiring EV tax credits.
The Bull Case for Tesla
If you’re considering buying Tesla stock, here’s the optimistic view:
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AI and robotaxi potential: If Tesla succeeds in scaling its self-driving technology, it could unlock trillions in value.
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Scale and resources: With a $1.4 trillion market cap, Tesla has unparalleled access to capital compared to EV startups.
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Brand strength: Tesla maintains strong brand loyalty and recognition worldwide.
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Vertical integration: Tesla controls more of its supply chain than competitors, potentially leading to better margins long-term.
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Musk’s leadership: While controversial, Musk’s vision and execution have defied skeptics repeatedly.
ARK Invest’s bull case predicts Tesla shares could reach $2,600 by 2029, with “90% of that enterprise value coming from robotaxis.”
The Bear Case Against Tesla
On the other hand, skeptics point to:
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Extreme valuation: At a P/E ratio of 300+, Tesla needs everything to go right to justify its price.
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Production challenges: Tesla has missed delivery targets multiple times.
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Musk’s promises: Elon regularly makes ambitious predictions that fail to materialize on schedule.
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Competitive threats: Tesla’s first-mover advantage is eroding as more competitors enter the EV space.
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Regulatory headwinds: Changes to EV incentives and potential tariffs could hurt Tesla’s growth.
Should You Buy Tesla Stock?
So, is Tesla a good stock to buy? The answer depends on your investment horizon, risk tolerance, and belief in the company’s AI and robotaxi ambitions.
For long-term investors who believe in Tesla’s vision:
- The current price might be justified if you think Tesla will dominate self-driving technology and robotaxis
- You’re essentially betting on Elon Musk’s ability to execute on extremely ambitious goals
- You should be prepared for significant volatility
For more conservative investors:
- Tesla’s current valuation leaves little room for execution missteps
- Waiting for a better entry point might be prudent
- Consider dollar-cost averaging to mitigate timing risk
Investment Strategies for Tesla Stock
If you decide Tesla belongs in your portfolio, consider these approaches:
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Start small: Begin with a smaller position that you can add to over time.
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Dollar-cost averaging: Invest a fixed amount at regular intervals rather than all at once.
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Options strategies: More experienced investors might use options to establish positions at lower effective prices.
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Portfolio allocation: Given Tesla’s volatility, limit it to a reasonable percentage of your overall portfolio.
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Watch key catalysts: Pay attention to robotaxi expansion announcements, delivery numbers, and regulatory developments.
Final Thoughts
Tesla represents a fascinating but polarizing investment opportunity. The company has defied skeptics before, but current valuations demand near-perfect execution of ambitious plans.
When I look at Tesla, I see a company with extraordinary potential but also extraordinary expectations baked into its stock price. The recent upgrade to a ‘buy’ rating based on record free cash flow generation is encouraging, but investors should proceed with caution.
If you believe in Tesla’s ability to transform transportation through AI and self-driving technology, the current price might eventually look cheap. If those ambitions fail to materialize on schedule, however, there could be significant downside risk.
As with any investment, do your homework, understand what you’re buying, and make sure Tesla aligns with your personal investment goals and risk tolerance. The stock might be volatile, but it’s certainly never boring!
Tesla’s Q3 results: cause for concern despite record revenue
Tesla’s quarterly vehicle deliveries have been declining over recent quarters so its latest results reversed a troubling trend and beat analyst expectations.
Tesla delivered 497,099 vehicles during Q3 2025, a 7.4% increase on the previous year and 29% higher than the previous quarter.
The surge in delivery numbers was expected due to the end of Biden-era EV tax credits in the US, which prompted a rush to purchase EVs before the $7,500 hike. So while Q3’s delivery numbers look good in isolation, they have effectively been boosted by this tax credit.
The proof in the pudding is that Tesla, unusually, delivered more vehicles than it produced in the quarter. The company seems to know that this quarter was an exception as far as demand is concerned and this is likely to fall in future. Q4 numbers will be the ones to watch.
Tesla is also facing significant pricing pressures from more affordable competitors, especially Chinese carmaker BYD, and has been offering its own incentives such as insurance subsidies and interest-free loans.
Investors remain disappointed by its earnings per share which fell 31% to $0.50, below forecasts for $0.54.
Teslas chief finance officer Vaibhav Taneja told analysts that tariffs had cost the firm more than $400m in the previous quarter.
Victoria Scholar, head of investment at interactive investor, said: “Tesla is also dealing with higher costs associated with investments into artificial intelligence and robotics and pressure from the expiration of tax credits for EVs from the White House.”
Musk’s $1 trillion pay proposal
The proposal – backed by 75% of Tesla shareholders – will see Musk granted up to approximately 425 million shares if certain targets are hit over the next ten years. That would give Musk around 25% of all Tesla’s voting power, according to Ives.
Some of these targets are linked to Tesla achieving particular market cap thresholds, with the threshold for the final tranche of shares to be awarded set at $8.5 trillion. 425 million shares at that valuation would be worth over $1 trillion.
Other targets that Musk would have to hit to achieve the full payout include delivery of 20 million Tesla vehicles, 10 million full self-driving (FSD) subscriptions, 1 million robots delivered and 1 million robotaxis in commercial operation.
Tesla would also need to deliver $400 billion in adjusted EBITDA to achieve the full payout.
Walter Isaacson: Musk needs Tesla’s stock not just for the money, but also to control the company
FAQ
What will Tesla stock be worth in 2025?
Tesla Stock Price Predictions for the end of 2025: Most Bullish Projection: 786 (StockScan and BeatMarket) Most Bearish Projection: 442 (WalletInvestor)
What if I invested $1000 in Tesla 10 years ago?
Where will Tesla be in 5 years?
Tesla’s five-year forecast is highly varied, ranging from moderate analyst targets around $350-$400 to very optimistic predictions like ARK Invest’s $2,600 target. Analyst ratings are generally positive, with a consensus “Buy” rating, but short-term price targets often show little or no upside potential due to concerns about near-term auto margins and competition. Long-term forecasts depend heavily on the success of future ventures like the robo-taxi and Optimus robot, which are viewed as key value drivers.
Is Tesla good for investing?
Tesla is a good stock to invest in now because it is a leader in the electric vehicle market and is expected to continue to grow at a rapid pace. Additionally, Tesla has strong prospects for its energy storage business and is expected to benefit from the continued growth of the solar energy market.