Over the last 12 months, Tesla (NASDAQ:TSLA) stock’s been more volatile than a toddler who’s accidentally been fed an espresso brownie. As someone who’s seen both, I can attest to this.
Shares in Elon Musk’s company-that-makes-cars-despite-not-being-a-car-company are up 95%. That’s enough to turn a £5,000 investment into something worth £10,055 after factoring in exchange rates.
Cars
For the first time, Tesla recorded a year-on-year decline in deliveries. And this happened despite Tesla offering incentives to boost volumes and maintain revenues at the expense of its margins.
While the market for cars in general might have been weak at the start of the year, the entire decline can’t be put down to a difficult environment. US light vehicle sales eventually grew 2% in 2024.
Despite the enduring popularity of the Model Y, Tesla lost market share to every US manufacturer with the exception of Stellantis. And the less said about its robotaxi event in October, the better.
None of this is a reason for the share price to almost double over the last 12 months. But there was a lot for shareholders to be positive about along the way.
Outlook
Car sales may have been underwhelming, but Tesla’s shown itself to be robust. Instead of cars, the company’s managed to prop up its bottom line by selling regulatory credits.
Some people might be critical of this, but I think that’s a mistake. Ultimately, money’s money and the firm’s shown it has a mechanism for getting through a weak period in electric vehicle (EV) demand.
Furthermore, the downturn might be temporary. The launch of the new Model Y Juniper could boost demand and the anticipation of this might be part of the reason for the weak recent sales.
Lastly, the firm announced plans to launch a car with a price tag below $30,000. This could also help increase sales and it uses Tesla’s biggest advantage when it comes to manufacturing – its scale.
Risks
Tesla shareholders have a lot to be optimistic about. But to say the company still has challenges ahead is an understatement along the lines of saying Everest is ‘a bit of a climb’.
A change in US government might take away the regulatory credits that have been propping up the company’s bottom line. That would put increased pressure on other revenue sources.
The new administration might make Tesla getting the necessary approval for its robotaxi network easier. But it’s unclear exactly how much influence the federal government has over state regulators.
Whether people buying an affordable vehicle for $30,000 are going to spend an extra $8,000 for FSD software is also uncertain. If they don’t, the new cars might come at the cost of Tesla’s overall margins.
The lesson for investors
Tesla’s share price has been through more ups and downs in the last year than most stocks do in a decade. But investors who have sat tight and held on have been handsomely rewarded.
Anyone wanting to buy the stock has had plenty of opportunities when the share price has been falling. And I think there will be plenty more in future, but I don’t think right now’s one of them.
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Stephen Wright has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
