Tesla is one of the world’s largest manufacturers of electric vehicles (EVs), but it struggles to compete with more affordable brands.
The company will release its fourth-quarter 2025 electric vehicle sales numbers around January 2, and they will likely cap a very weak year.
Tesla stock is trading at an exorbitant valuation, making it a very difficult investment right now.
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Tesla(NASDAQ:TSLA) The stock is on track to end 2025 with a gain of more than 25%, and it’s currently trading near an all-time high. Investors have been flocking to the stock in anticipation of the company’s future product platforms, like the Cybercab robotaxi and the Optimus humanoid robot, both of which are expected to launch within the next two years.
However, more than 70% of Tesla’s revenue still comes from the sale of electric vehicles (EVs), and this core part of its business is currently suffering from low demand, driven by a sharp increase in global competition. On or around January 2, the company will release its electric vehicle delivery numbers for the fourth quarter of 2025, which could help determine the direction of its stock in the near term.
Should you invest in Tesla before the report is published?
Image source: Tesla.
Tesla delivered 1.79 million electric vehicles in 2024, down 1% from the previous year. It was the company’s first annual sales decline since the launch of its flagship Model S in 2011. But the weakness accelerated in 2025, with Tesla’s deliveries falling 6% year-over-year in the first three quarters (ending September 30).
According to FactSet, Wall Street expects Tesla to have delivered about 450,000 electric vehicles during the fourth quarter (ending December 31). This would bring its annual total for 2025 to 1.67 million, a drop of 7% from 2024.
Competition is currently one of Tesla’s biggest challenges, especially in key markets like China and Europe. Consumers are opting for low-cost options from manufacturers like BYDwho sell electric vehicles at a price that Tesla simply cannot match. For example, BYD’s entry-level Dolphin Surf EV sells for just $26,900 in Europe, while Tesla’s Model 3 starts at $44,300.
As a result, Tesla’s electric vehicle sales fell 12% year-on-year in Europe in November alone. Excluding Norway, where sales benefited from the upcoming expiration of an electric vehicle tax credit, Tesla’s European sales in November were actually down more than 36%. The company’s market share in Europe is now just 1.6%, compared to 2.4% last year.
Tesla’s weak electric vehicle sales have fueled a sharp decline in its profits this year, but its shares continue to climb, leading to a sky-high valuation. Based on the company’s trailing 12-month earnings of $1.44 per share, its shares are trading at a price-to-earnings (P/E) ratio of 322 as of this writing.
This makes Tesla almost 10 times more expensive than the Nasdaq-100 tech index, which trades at a P/E ratio of 33. That also makes Tesla the most expensive U.S. stock in the exclusive $1 trillion club — and it’s not even close.
TSLA PE ratio data by YCharts. PE ratio = price/earnings ratio.
Based on its valuation alone, it’s very difficult to justify buying Tesla stock before January 2nd. Even if the company delivers significantly more cars than expected, that still won’t be enough to justify its sky-high P/E ratio. In fact, its stock would have to fall 78% just to trade in line with the P/E ratio of the most expensive stock in the trillion-dollar club, Broadcom.
Tesla’s Cybercab autonomous robo-taxi is expected to enter mass production in 2026. It will run on the company’s Fully Self-Driving (FSD) software, allowing it to transport passengers 24 hours a day, creating a potentially lucrative revenue stream. Wall Street firms like Cathie Wood’s Ark Investment Management believe this could become Tesla’s biggest source of revenue in the future.
However, Tesla’s FSD software is not yet approved for unsupervised use in the United States (although approval in California is reportedly close), so the company’s robotaxi program is already behind the competition. AlphabetWaymo, for example, has developed a robotaxi that already provides more than 450,000 paid autonomous trips each week in five US cities.
Then there’s the humanoid robot Optimus, which Tesla CEO Elon Musk says could generate $10 trillion in revenue for the company in the long term. He believes that humanoid robots will outnumber humans by 2040, as they will find applications in both businesses and households.
However, Optimus is even further than Cybercab in terms of commercialization. Musk believes the latest version, Optimus 3, likely won’t enter mass production until late 2026, but he hopes to reach one million annual units relatively quickly.
While these new products provide extremely valuable opportunities for Tesla, none of them will be a factor until the company announces upcoming electric vehicle deliveries on January 2. Since it will take them a few more years to generate significant revenue, I think there is a risk that Tesla shares will suffer a sharp correction in the meantime.
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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool holds positions and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Meta Platforms, Microsoft, Nvidia and Tesla. The Motley Fool recommends BYD Company and Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Should you buy Tesla stock before January 2? was originally published by The Motley Fool
