As the world remains mired in geopolitical tensions, it seems like we were in a different era when uncertainties in the market meant skirmishes between President Trump and Tesla (TSLA) CEO Elon Musk on X. Every reaction and response to the same was watched by hawk-eyed market observers who had any interest in the EV giant’s stock.
But can Tesla be kept out of the news cycle for long? Not really, after the company’s shares saw a sharp correction of more than 3% when it was revealed that the National Highway Traffic Safety Administration (NHTSA) had launched an investigation into its Full Self-Driving (FSD) (Supervised) system following several crashes.
Tesla and NHTSA have been battling each other for a few years now, irrespective of the administration at the helm in Washington, with the first prominent case dating back to phantom braking in February 2022. Skeptics might say that the stock is up just 33% since then, yet Tesla’s dismal share price performance cannot be entirely attributed to government institutions. Instead, intense competition from Chinese low-cost players like BYD (BYDDY) and Musk’s political plunge are the primary culprits.
Having said that, the market reacted negatively to the recent development, and the $1.47 trillion market cap company’s stock is under scrutiny again. How should investors make a play at it? Let’s find out.
Tesla has posted impressive long-term results, with revenue and earnings compounding at annual rates of 24.63% and 34.93% over the past five years. That said, a return to those levels of growth now looks challenging, as the results for the most recent quarter demonstrate.
In Q4 2025, the company beat both revenue and earnings estimates, but the broader picture was weaker. Total revenue fell 3% year-over-year (YoY) to $24.9 billion, with automotive revenue dropping 11% to $17.7 billion. Earnings per share declined 17% to $0.50, though it edged past the $0.45 consensus. EPS has now fallen on a YoY basis for four straight quarters. Further, over the last nine quarters, Tesla has beaten earnings estimates only three times.
Meanwhile, margins narrowed to 5.7% from 6.2% a year earlier. Operating cash flow decreased 21% to $3.8 billion. The company ended the quarter with $44.1 billion in cash, ahead of short-term debt of $31.7 billion.
Production and deliveries both declined after a temporary lift from the end of federal EV tax credits. Production totaled 434,358 vehicles, down 5% YoY, while deliveries fell 16% to 418,227 units.
Some positive signs did emerge. Active FSD subscriptions rose 38% YoY to 1.1 million. Additionally, the energy segment showed steady strength, with revenue up 27% to $12.8 billion, and Supercharger stations increased 17% to 8,182, while connectors grew 19% to 77,682.
On valuation, Tesla trades at levels far above most large-cap peers. The forward P/E stands at 189.94, compared with a sector median of 14.45. Forward P/S of 14.12 and P/CF of 88.36 also sit well above sector medians of 0.87 and 9.36. That said, many analysts still value the company primarily as an automaker, which may understate its growing exposure to AI and robotics.
The title says it. Tesla is not for the faint of heart, and it is not just about their vehicles. With sky-high ambitions of being the foremost name in robotics, autonomous vehicles, space tech, and AI, Tesla can be the most consequential company in the history of mankind. But there is always an “if” with Tesla. If Musk can redirect his focus towards Tesla solely, which he should after the approval of his humongous $1 trillion pay package, and if Tesla can find a way to somehow negate the impact of Chinese EVs, along with steadily fulfilling its mandates in robotics with Optimus, with space tech in SpaceX, and with AI in xAI, the future is bright for the company’s shareholders.
Specifically, Optimus occupies a lot of Musk’s time and also its current valuation. To that end, the announcement of the launch of Digital Optimus soon can be a further tailwind for the initiative. Digital Optimus is a joint artificial intelligence initiative between Tesla and xAI designed to automate complex enterprise computing tasks. Operating as an autonomous software agent, it utilizes continuous real-time video processing and Grok reasoning models to navigate digital interfaces without human intervention. For the physical Optimus humanoid, this technology serves as the cognitive software foundation, managing screen-based workflows while the physical robot executes manual labor.
Across other corporate segments, the project transforms parked vehicles equipped with AI4 hardware into a distributed supercomputer network. By deploying millions of dedicated inference units at Supercharger stations, Tesla aims to monetize roughly seven gigawatts of available power capacity.
Financially, this leverages the relatively low-cost $650 AI4 chip alongside frugal Nvidia (NVDA) components to minimize server expenses. Supported by a two billion dollar investment in xAI, this high-margin enterprise service creates a scalable new revenue stream, significantly driving long-term shareholder value.
Moreover, in my last analysis, I had highlighted how Tesla is taking matters into its own hands with its “Terafab” to reduce dependence on the likes of Nvidia, TSMC (TSM), and Micron (MU).
Tesla is also simultaneously accelerating its energy storage and autonomous ride-hailing segments to diversify revenue beyond traditional automotive sales. Within the energy division, the company recently gained approval to supply electricity in the UK. Following a rigorous seven-month assessment, this authorization enables the company to strategically replicate its successful Texas-based Tesla Electric retail model overseas. By integrating its extensive install base of Powerwall home batteries and electric vehicles, the company aims to establish a sophisticated virtual power plant network. This ecosystem allows consumers to optimize charging costs during off-peak hours while monetizing excess stored energy by discharging it back to the grid during peak demand. Although restricted to electricity rather than dual-fuel contracts, this high-margin service vertical perfectly complements existing utility-scale Megapack deployments.
Concurrently, the autonomous vehicle segment is preparing for the April 2026 volume production launch of the purpose-built Cybercab at Gigafactory Texas. Utilizing a revolutionary unboxed manufacturing process to target a sub-$30,000 price point, this pedal-less platform aims to scale the unsupervised robotaxi fleet domestically by year’s end.
Together, these verticals pivot the corporate valuation model from cyclical hardware manufacturing to recurring high-margin infrastructure revenues.
Considering this, analysts have deemed TSLA stock to be a “Hold,” with a mean target price of $408.42. This denotes an upside potential of about 9% from current levels. Out of 43 analysts covering the stock, 15 have a “Strong Buy” rating, two have a “Moderate Buy” rating, 17 have a “Hold” rating, and nine have a “Strong Sell” rating.
On the date of publication, Pathikrit Bose did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com