Tesla (TSLA) – It’s All About Execution

Tesla (TSLA) is wrapping up 2025 as one of the most volatile yet high-performing stocks, surging to all-time highs above $490 this week after overcoming a difficult first half of the year. Despite posting weak results in its core automotive business, investors have aggressively bid up the stock based on its transformation into a "Physical AI" and robotics company. As of late 2025, Tesla's valuation has become increasingly disconnected from its immediate earnings, with a P/E ratio above 300, a level considered high even for high-growth tech companies.

The EV segment of Tesla has seen deteriorating sales this year as the Tax Credits went away and political leanings caused some volatility. Q3 2025 operating margins dipped to 5.8% compared to 10.8% in Q3 2024, reflecting intensified competition, particularly from Chinese rivals like BYD. While EVs remain the primary revenue driver for Tesla, the Energy generation and storage segment has become a significant growth engine, with margins exceeding 30%.

The stock's recovery was fueled by enthusiasm for autonomous driving (Robotaxi), the Optimus humanoid robot, and the reinstatement of CEO Elon Musk's massive compensation package. The stock has seen some divergence from Wall Street, but the Bulls have taken control since hitting April lows. Bulls believe Tesla’s FSD (Full Self-Driving) technology and planned $30,000 "Cybercab" could unlock trillions in valuation, potentially pushing the stock even higher in 2026. Post-2024 election sentiment improved on hopes that a favorable regulatory environment under the Trump administration could accelerate the approval of autonomous vehicles. While not for EV’s with the loss of the tax credit but for other segments of its business. Just this past weekend, Tesla CEO Elon Musk's net worth has hit $749B following the Delaware Supreme Court's decision to reinstate Tesla stock options worth $139B that were voided last year, according to a Reuters report. The court resorted Musk's 2018 pay package two years after a lower court struck down the compensation deal. Also lending support was the report that SpaceX is moving forward with an insider share sale that values Elon Musk's rocket and satellite maker at about $800B, setting up what could be the largest initial public offering of all time.

Skeptics warn that the current valuation prices in near-flawless execution of speculative projects. If Tesla fails to hit milestones for Robotaxis or Optimus, or if EV competition further hits margins, the stock could face significant headwinds.

Just this morning, Canaccord raised the firm's price target on Tesla to $551 from $482 and keeps a Buy rating on the shares. The firm reduced its Q4 delivery outlook for Tesla to 427,000 from 470,000, citing a sharper than anticipated deterioration in demand, with weakness broad-based across products and regions. The firm believes the end of U.S. electric vehicle subsidies, while a near-term drag on demand, is "forcing a healthier, more durable market to emerge." The analyst believes electric vehicle adoption is "rising quickly" in emerging markets such as Thailand, Vietnam, and Brazil. Tesla's Robotaxi rollout is progressing, the firm adds. Canaccord says the company's underlying positives outweigh the near-term earnings reset.

Wall Street remains deeply divided on TSLA and that may continue in 2026. Execution of goals and staying out of any negative headlines may be the keys for any extension of the rally.

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