Investing in Tesla (TSLA) has always been an exciting, but often unpredictable, journey. This year, the stock has been trending downwards, falling over 5% so far. But does this recent drop make Tesla stock an attractive purchase?
P is for “pivot”…
Tesla’s stock price recently dropped, largely due to its financial results for the last three months of 2025 and the entire year. Although the company earned more revenue and profit than experts predicted, both were down compared to the previous year.
To make matters worse, the total number of vehicles delivered also decreased, dropping by 16% to 495,570. Given that Tesla is still mainly a car company, this decline was definitely concerning.
Tesla also plans to significantly increase its spending this year, with capital expenditures expected to exceed $20 billion – more than double what they anticipate spending in 2025. This investment will go beyond just building cars, and will include developing their own battery technology, the CyberCab self-driving taxi and its Robotaxi system, and advancements in artificial intelligence.
As an equity researcher covering Tesla, I’ve been focusing on their future production strategy. Interestingly, Elon Musk recently announced they’ll be scaling back production of the Model S and Model X. This means Tesla will primarily be offering the more affordable Model 3 and Model Y, alongside the Cybertruck, moving forward. I intentionally didn’t dwell on the older models in my analysis, given this shift.
Although the company didn’t explicitly say they were changing direction, this move certainly feels like a major shift. The factory currently making the Model S and X cars will now be used to build Optimus, the robot Tesla has been working on for years. Elon Musk aims to produce one million Optimus robots there each year.
The company plans to begin making the CyberCab in April. Elon Musk confidently predicted that, eventually, they will produce more CyberCabs than all of their other vehicle models combined.
…and for “pricey”
Even though Tesla is a leading electric vehicle company, it makes sense for them to explore other areas. The competition in the car market is fierce and will likely remain that way. Tesla’s future success will depend on projects like CyberCab, the Optimus robot, and their Full Self-Driving (FSD) Supervised system, which will soon be available only through a subscription.
Tesla’s stock is still quite pricey when you look at its financial metrics. Currently, it has a forward price-to-earnings ratio of nearly 205, and its five-year PEG ratio is a high 6.8, suggesting it may be overvalued.
Optimus and CyberCab would need to be incredibly successful products to justify such large investments. The new battery factory also has the potential to be a major leader in its field. While strong sales of Full Self-Driving subscriptions would be beneficial, many people are already overwhelmed with the number of subscriptions they have, which could limit demand.
Elon Musk and Tesla have a history of success, and if anyone can achieve ambitious goals, it’s likely them. However, even with their track record, this is a very difficult undertaking, and I don’t believe Tesla is a good investment right now, despite the recent drop in price.
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2026-02-13 07:12