Should you invest in Tesla?

Investors the world over get caught in the Tesla conundrum. Is Tesla a good investment, and should they buy the stock?

Earlier this year, it looked as though 2025 was turning into a car crash for Tesla, with Donald Trump’s tariffs, bad publicity and weak sales all sending the stock lower. By 8 April, Tesla’s share price had fallen 41.5% since the start of the year.

But between then and 2 October, Tesla’s shares nearly doubled in price, gaining 97% in value. That was helped along by a surge since 10 September, which saw Tesla stock gain over 22% in less than a fortnight.

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These gains briefly tipped CEO Elon Musk’s net worth over $500 billion, making him history’s first ever half-trillionaire.

Having previously lagged behind the other Magnificent Seven big tech stocks, Tesla has leapfrogged Apple and Amazon into fifth place with in terms of year-to-date share price performance. Over the month to 3 October September, Tesla leads the group with gains of 29%.

There have been various catalysts for this surge, including an expansion of Tesla’s ‘robotaxi’ self-driving car capability, as well as share purchases and a new pay deal for Tesla’s divisive CEO Elon Musk.

“A few tough quarters still lie ahead, but the robotaxi program is finally moving from hype to hardware,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown.

The upshot is that Tesla’s share price is now up 12% so far this year, having spent much of it in negative territory. But is now a good time to buy Tesla shares?

Tesla shares fall despite record delivery numbers

Tesla’s quarterly vehicle deliveries have been declining over recent quarters as part of a troubling trend. Tesla is facing significant pricing pressures from more affordable competitors, especially Chinese carmaker BYD.

Within that context it might look like a big positive that Tesla posted its highest ever vehicle delivery numbers on 2 October. In total, Tesla delivered 497,099 vehicles during Q3 2025, a 7.4% increase on the previous year and 29% higher than the previous quarter.

Despite this, Tesla shares fell around 1.2% during the opening hour of trading on 3 October (even as the S&P 500 rose).

The surge in delivery numbers was expected due to the end of Biden-era EV tax credits in the US, which prompted a rush to purchase EVs before the $7,500 hike. So while Q3’s delivery numbers look good in isolation, they have effectively been boosted by this tax credit.

The proof in the pudding is that Tesla, unusually, delivered more vehicles than it produced in the quarter. The company seems to know that this quarter was an exception as far as demand is concerned and this is likely to fall in future. Q4 numbers will be the ones to watch.

The robotaxi revolution continues

Car sales alone can’t justify Tesla’s present valuation.

Tesla’s trailing P/E ratio is nearly 260; this implies that it would take Tesla 260 years of posting its current level of earnings before it will recoup its current market cap in shareholder equity.

The rationale for these dizzying multiples has always been the promise of its robotaxi business. Effectively, this will turn thousands of Teslas into self-driving taxis in the blink of an over-the-cloud software update.

“Tesla has the capability to scale that service incredibly rapidly,” said Sam Korus, director of research for autonomous technology & robotics at ARK Invest.

Following Tesla’s Q2 earnings call, Musk suggested that robotaxis could be available to half the US population by the end of the year. That target looks like it will be missed (like many of Musk’s previous ones) by some distance, but the service does look set to expand: Tesla was awarded a permit to start testing its self-driving vehicles in Nevada on 11 September. Tesla shares gained 6% on the day as the news broke.

Elon Musk’s new deal

Tesla’s CEO Elon Musk has received widespread criticism this year for seemingly not being behind the wheel at Tesla and allowing brand damage to dent the carmaker’s sales.

To his fans, though, Musk is the ingredient that makes Tesla stock worth buying. Dan Ives, head of global technology research at Wedbush Securities, calls Musk Tesla’s “most important asset”.

Markets therefore greeted the news that Tesla was offering Musk a new pay packet worth $900 billion – which would be enough to make him the world’s first trillionaire – if he hits certain targets, including raising Tesla’s market cap from around $1 trillion to $8.5 trillion over the next ten years.

Ives described the pay package as “a relief for investors, as this will confirm Musk stays CEO of Tesla at least until 2030”.

Tesla shares gained 3.6% on 5 September, the day the new pay packet was announced. More recently, shares gained 7.6% in the week to Friday 19 September as it emerged that Musk had bought around $1 billion of Tesla stock.

Should you invest in Tesla?

The biggest consideration to make over whether to invest in Tesla is whether its growth prospects justify the level that it is currently trading at: currently, Tesla shares cost over 170 times its projected earnings.

By this metric, it is the most expensive member of the Magnificent Seven. The next highest price-to-earnings ratio in the group is Microsoft’s, at 33 times its forecast earnings.

Tesla shares closed Tuesday 23 September at $436, 74% above Morningstar’s fair value estimate of $250. The ratings agency has noted that Tesla’s management hasn’t guided for delivery numbers this year, which Morningstar interprets as a sign Musk and his colleagues aren’t expecting delivery numbers to grow in 2025. Morningstar concludes that deliveries will probably in fact fall during the year.

ARK, on the other hand, is one of the most bullish Tesla investors out there: it predicts that Tesla shares will be worth $2,600 by 2029, “with 90% of that enterprise value coming from robotaxis,” according to Korus.