Tesla stock appears relatively expensive, making it a costly option at its current price of around $250. The company faces several risks. The U.S.’s imposition of tariffs on all imports threatens to trigger a recession, while growing tensions between the U.S. and China, along with potential brand damage due to CEO Elon Musk’s political involvement, could further impact Tesla. The stock remains nearly 47% below its December 2024 peak, and more downside could follow, as Tesla has historically underperformed the broader market in downturns. For instance, during the 2022 inflation shock, Tesla stock plunged 73.6% compared to a 25.4% drop in the S&P 500. This suggests further downside is possible. Separately, want exposure to AI? Should you Buy MSFT Stock At $400?
Tesla’s vehicle deliveries have declined, with the company reporting 336,681 deliveries in Q1 2025, down 13% year-over-year. The situation could deteriorate further. The U.S.-China trade war is intensifying, with President Trump raising tariffs on Chinese goods to 125%, while China responded with an 84% duty on American imports. Although Tesla manufactures in China at its Shanghai plant, potential anti-American sentiment and Elon Musk’s perceived alignment with Trump may affect sales. China accounted for 21% of Tesla’s revenue in the past year. The Shanghai facility, with a capacity of over 950,000 vehicles annually, produced over half of Tesla’s 2024 shipments. Reduced sales and underutilization may squeeze margins, especially as competition from Chinese automakers surges with high-tech, competitively priced vehicles.
The U.S. market outlook is more mixed. Tesla may benefit from its upcoming Robotaxi launch in Austin and a refreshed Model Y. However, Elon Musk’s political involvement, particularly his role in the Trump administration, is alienating progressive consumers. While the new tariffs give Tesla a cost edge over competitors reliant on Mexican production, Tesla also sources many components from China and Mexico, potentially increasing its own costs. In Europe, the situation is grim. Tesla’s Q1 market share in 15 European countries dropped to 9.3% from 17.9% a year ago, following Musk’s support of Germany’s far-right AfD party during February elections.
Fundamentally, Tesla’s metrics don’t justify its high valuation. Despite strong operating performance and financial stability, as outlined below, investors seeking lower volatility might consider the Trefis High-Quality Portfolio, which has outpaced the S&P 500 with over 91% returns since inception.
How Does Tesla’s Valuation Look vs. The S&P 500?
By sales and profit multiples, TSLA stock remains significantly overvalued relative to the broader market.
• Tesla’s price-to-sales (P/S) ratio stands at 8.9, versus 3.2 for the S&P 500
• Its price-to-operating income (P/EBIT) ratio is 112.7, compared to 24.3 for the S&P 500
• The price-to-earnings (P/E) ratio is 122.6 versus 24.3 for the S&P 500
How Have Tesla’s Revenues Grown Over Recent Years?
Tesla’s Revenues have seen moderate growth recently.
• Tesla’s top line grew at an average annual rate of 23.7% over the past three years (vs. 6.3% for the S&P 500)
• Revenues rose 0.9% from $97B to $98B in the last 12 months (vs. 5.2% for the S&P 500)
• Q1 revenue increased 2.1% to $26B year-over-year (vs. 5.0% for the S&P 500)
How Profitable Is Tesla?
Profit margins are near the median level among companies covered by Trefis.
• Operating Income over the last four quarters was $7.8B, for an Operating Margin of 7.9% (vs. 13.0% for the S&P 500)
• Operating Cash Flow was $15B, yielding a Cash Flow-to-Sales Ratio of 15.3% (vs. 15.7% for the S&P 500)
Does Tesla Look Financially Stable?
The company’s balance sheet is exceptionally strong.
• Tesla’s debt was $14B at quarter-end, with a market cap of $811B (as of 4/10/2025), implying a Debt-to-Equity Ratio of 1.6% (vs. 19.0% for the S&P 500)
• Tesla held $37B in cash among $122B in assets, yielding a Cash-to-Assets Ratio of 30.0% (vs. 14.8% for the S&P 500)
How Resilient Is TSLA Stock During A Downturn?
TSLA stock has underperformed the S&P 500 in past downturns. Concerned about future declines? See our dashboard on TSLA crash potential and market crash comparisons.
Inflation Shock (2022)
• Tesla dropped 73.6% from $409.97 (Nov 4, 2021) to $108.10 (Jan 3, 2023), vs. a 25.4% fall in the S&P 500
• It fully recovered by Dec 11, 2024
• Peaked at $479.86 on Dec 17, 2024, and now trades around $250
Covid Pandemic (2020)
• Tesla fell 60.6% from $61.16 (Feb 19, 2020) to $24.08 (Mar 18, 2020), vs. a 33.9% drop in the S&P 500
• Recovered its pre-crisis peak by June 8, 2020
Putting All The Pieces Together: What It Means For TSLA Stock
Summary of Tesla’s performance by key metrics:
• Growth: Strong
• Profitability: Neutral
• Financial Stability: Extremely Strong
• Downturn Resilience: Very Weak
• Overall: Neutral
However, due to its extremely high valuation, the stock appears overpriced, supporting the conclusion that TSLA is an expensive buy.
Given TSLA’s rich valuation, upside potential may be limited in the short-to-mid term. Investors might explore the Trefis Reinforced Value Portfolio, which has outperformed a diversified benchmark combining the S&P 500, S&P mid-cap, and Russell 2000 indices. Its quarterly rebalancing strategy provides exposure to favorable conditions while cushioning against downturns, as explained in the RV Portfolio performance sheet.
Invest with Trefis
Market Beating Portfolios | Rules-Based Wealth