Tesla (TSLA) has been on a tear over the past week, sparked by its latest results and fueled further by the U.S.-China trade deal announced this week that eased tariff tensions. Tesla bulls seem to be celebrating, but Tesla’s core problems remain, including weak deliveries, sky-high speculation, and a valuation that’s bordering on the absurd. So in my view, this rally, as tempting as it looks, feels like a golden moment to do the reverse of buying the dip and sell the spike.
Recent market optimism, bolstered by progress in U.S.-China trade negotiations and the easing of tariff tensions, has significantly boosted Tesla’s stock, which rose nearly 7% on Monday. However, a closer look at Tesla’s Q1 performance reveals some concerning trends. Vehicle deliveries declined by 13% to 336,681 units, marking the steepest quarterly drop in the company’s history. In Europe, sales were particularly challenged, with notable declines in key markets such as Germany and France.
The underperformance in Q1 doesn’t appear to stem from isolated issues. Tesla faces increasing competition from manufacturers like BYD, which delivered 416,388 electric vehicles during the same period and currently holds the lead in global EV sales.
Tesla (TSLA) estimated and reported earnings history
Although production slowdowns related to updates for the Model Y were a factor, the competitive landscape is shifting rapidly, with rivals introducing more affordable and technologically appealing models. While the improved trade environment may offer some support, it does little to address concerns over Tesla’s brand perception and the potential impact of CEO Elon Musk’s political associations, which some analysts believe may influence consumer sentiment and sales performance.
Speculation is a Shaky Foundation for Growth
Another reason I believe Tesla stock makes for a great sell following its recent gains is that much of that investor confidence is tied to speculation. Tesla has always been a story stock, and right now, investors are betting on moonshots like Robotaxis and the Optimus Humanoid robot. The Robotaxi pilot, set for Austin in June 2025, has folks excited, with Musk claiming it’ll expand to other cities by year-end.
Tesla may not be leading the charge in autonomous technology at this stage. Companies like Waymo already operate commercial robotaxi services in multiple cities, backed by over 20 billion miles of real-world driving data. Waymo’s sensor-rich approach has proven effective, while Tesla’s more cost-efficient, camera-based system remains relatively untested at scale. Uber’s partnership with Waymo further signals the momentum building behind Tesla’s competitors.
Tesla Optimus robot at Scottsdale Fashion Square mall in Phoenix, Arizona (2023)
Meanwhile, Tesla’s Optimus robot—promoted by CEO Elon Musk as a potential trillion-dollar opportunity—has generated significant interest. The concept is compelling, and public enthusiasm is high. However, Tesla’s immediate plans are modest, with just 1,000 units slated for internal testing by the end of 2025. Other companies, including Huawei, are also entering the robotics space, increasing competitive pressure.
While these initiatives contribute to Tesla’s stock valuation and long-term narrative, they are still in the early stages and unlikely to produce substantial revenue soon. Given Tesla’s history of ambitious timelines and frequent delays—illustrated by the protracted Cybertruck rollout—there’s reason for caution. The market appears to be pricing in a future where Tesla dominates AI and autonomous systems, but achieving that vision will require overcoming significant technological and competitive hurdles.
TSLA’s Valuation Goes From Bold to Bonkers
Last but not least, the recent rally has pushed Tesla’s valuation to nosebleed levels. Its market cap is over $1 trillion while its P/E ratio is 187x this year’s expected EPS, which is expected to decline 21% since last year. Even with consensus estimates pointing to EPS growth of 51% and 28% in 2026 and 2027, this still implies P/E ratios of 110x and 86x.
Tesla (TSLA) revenue, earnings and profit margin history
No matter how much growth you try to price into the stock, as these estimates seem to support, Tesla still comes out outrageously expensive. In the meantime, BYD, which is also leading the market and growing at excellent rates, trades at just 20x this year’s expected EPS.
Let’s not forget that Wall Street’s estimates could be inflated in the first place. Q1’s earnings were a wake-up call, as Tesla missed EPS estimates by $0.14, reporting $0.27. So, the estimates I just mentioned could very well be highly optimistic, suggesting that Tesla is even more expensive than its forward-looking multiples show today.
What is the Target Price for Tesla?
Wall Street’s view on Tesla underscores how polarizing the stock remains. Tesla stock now has a Hold consensus rating, with 16 analysts currently bullish, 10 staying neutral, and 11 supporting a bearish view. TSLA’s average price target is $284.23, indicating a downside potential of 12% over the coming twelve months.
Tesla shares have surged in post-earnings enthusiasm and renewed optimism around U.S.-China trade developments. However, investors should tread carefully. Behind the rally lies a 13% drop in deliveries, a sharp downturn in European markets, and a valuation that appears disconnected from near-term fundamentals.
While Tesla’s long-term vision—featuring robotaxis and the Optimus humanoid robot—continues to capture imagination, rivals like Waymo and Uber already deploy commercial autonomous services. Tesla’s innovations, though promising, remain several years away from meaningful revenue. At current valuation levels, the risk-reward balance is increasingly precarious, so prudent investors may want to consider locking in gains and stepping aside.
