The wait’s over, but not quite in the way Tesla (TSLA – Free Report) investors were hoping. The electric vehicle (EV) giant released its 2024 vehicle delivery report yesterday, and the numbers have been disappointing. It delivered 1,789,226 vehicles in 2024 (comprising 1,704,093 Model 3/Y and 85,133 Other Models), down from 1,808,581 units sold in 2023.
On the third-quarter earnings call, Tesla CEO Elon Musk had said that he expected the company to witness modest delivery growth in 2024 despite macroeconomic uncertainty. But even after huge year-end incentives to fuel sales, the company failed to meet its full-year vehicle delivery target. In fact, this was the first time Tesla’s annual deliveries contracted.
Fourth-quarter deliveries totaled 495,570 units. While that was up over 2% year over year and also a new quarterly high, it failed to hit even the psychological milestone of 500,000 units. According to a consensus of estimates compiled by StreetAccount, analysts had predicted deliveries of 504,770.
With Tesla lagging expectations in its first key metric of 2025, its shares fell around 6% yesterday to close the session at $379.28. TSLA stock price dropped below $400 for the first time yesterday since Dec. 9, 2024, and is now roughly 20% off its all-time high of $479.86 achieved on Dec. 17, 2024.
In fact, TSLA’s meteoric run following Donald Trump’s victory in the 2024 elections seems to have hit the brakes, with the stock closing in the red over the past five trading sessions.
Image Source: Zacks Investment Research
At this point, investors might be facing the age-old dilemma of whether TSLA is a buy, hold, or sell now. Well, stock prices are more often than not guided by sentiment and emotions (as was with the rally after Trump’s win). A pullback was due and yesterday’s sharp slide could be a knee-jerk reaction to the delivery miss. But has this impacted Tesla’s long-term investment thesis? Is its growth runway intact, or has the narrative shifted?
How’s Tesla EV Business Positioned for 2025?
On the last earnings call, Musk highlighted that he expects Tesla’s vehicle sales to grow 20-30% in 2025, fueled by strong demand for the Model 3/Y, the Cybertruck, and an anticipated affordable EV set to debut in the first half of the year. However, challenges from last year linger, including weaker EV demand and intensifying competition, especially in China, where rivals like BYD Co Ltd (BYDDY – Free Report) , NIO, Li Auto, and XPeng pose a significant threat. Domestically, traditional automakers like General Motors (GM – Free Report) and Ford (F – Free Report) are also ramping up their EV portfolios.
With Trump resuming the presidency, new dynamics will come to play. A potential rollback of the $7,500 EV tax credit—a hallmark of the Biden administration—might temper demand for EVs in the United States. While some see this as a headwind for Tesla, others argue the company’s massive scale and brand loyalty make it less reliant on incentives compared to its competitors. Musk himself suggested that such a policy shift could impact Tesla in the short term but would hurt its rivals even more.
Meanwhile, Tesla’s competitive edge extends beyond vehicle sales. Its extensive North American Charging Standard (NACS) network, boasting over 60,000 supercharger connectors worldwide, is becoming a major revenue driver. The adoption of Tesla’s charging standard by automakers like GM and Ford underscores its market dominance and positions the company for long-term growth.
As Tesla faces evolving market dynamics, it’s to be seen if it can maintain its leadership in the global EV race? In 2024, BYDDY delivered 1.76 battery-powered EVs, just slightly trailing Tesla’s 1.789 million units. Both TSLA and BYDDY will be vying for EV sales crown in 2025.
TSLA’s Energy Storage Business is Thriving
One major growth driver for Tesla remains its Energy Generation and Storage business. This has been a standout performer, with revenues growing at a triple-digit compound annual growth rate over the past three years. This segment, which includes products like the Megapack, boasts the highest margins among Tesla’s business units. In the fourth quarter of 2024, the company deployed 11.0 GWh of energy storage products, up a whopping 243% year over year. Full-year deployments in 2024 jumped to 31.4 GWh from 14.7 GWh in 2023. The ramp-up of the Megapack factory to meet soaring demand positions Tesla to capitalize on the global energy transition.
A Lot Depends on TSLA’s Progress in the AV Domain
Tesla’s ambitions in the autonomous vehicle (AV) space are a key driver of investor optimism, particularly its plans to expand Full Self-Driving (FSD) capabilities and launch a dedicated robotaxi fleet. With Musk now co-leading the newly created Department of Government Efficiency under Trump, regulatory simplification for AV deployment could provide Tesla with a significant tailwind.
Currently, Tesla’s FSD system operates in a supervised mode, but the company aims to shift to unsupervised operation in select states like Texas and California as early as next year. Musk has also pledged to launch Tesla’s ride-hailing robotaxi service in these states and a few others in 2025, pending regulatory approval. If the new administration delivers on its promise to streamline AV regulations, Tesla’s robotaxi ambitions could finally take off, potentially transforming its long-term growth narrative.
TSLA’s Premium Valuation
From a valuation perspective, Tesla looks overvalued. Based on its price/sales ratio, the company is trading at a forward sales multiple of 12.15, higher than the industry and its own 5-year average.
However, Tesla’s involvement in several fast-growing sectors, including solar and clean energy, EV charging, and its FSD technology, cannot be overlooked. Typically, tech companies enjoy higher valuations than traditional automakers, and Tesla straddles both categories.
Image Source: Zacks Investment Research
Buy, Hold or Sell TSLA Now?
Tesla’s 2024 delivery miss has certainly sparked short-term bearishness. The stock is also trading below its 20-day moving average and facing the possibility of further declines ahead of its Jan. 29 earnings report. Investors will be closely monitoring updates from Musk on 2025 delivery expectations, AV advancements, along with key metrics like margins.
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Despite the recent stumble, Tesla’s long-term growth story remains intact. The company’s ambitious plans for FSD, an affordable EV, and a potentially game-changing robotaxi service highlight its potential to lead the future of mobility.
The Zacks Consensus Estimate for 2025 revenues and earnings implies 17.5% and 32% growth, respectively, from 2024 projected levels.
However, 2025 will be the critical “prove-it” year. Tesla must demonstrate its ability to grow sales, expand profits, and deliver on its bold promises. For now, patience might be the best strategy. New investors should wait for clearer signals of execution, while existing shareholders may find it prudent to hold their positions, banking on Tesla’s strong long-term tailwinds.
TSLA carries a Zacks Rank #3 (Hold) currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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