3 Forces That Could Shake Tesla Stock
Tesla (TSLA) has stumbled before. It’s stock plunged > 30% in span of less than 2 months 8 times in multiple years, wiping out billions in market value, and erasing massive gains in single correction. If history is any guide, Tesla (TSLA) stock isn’t immune to sudden, sharp downturns.
The Risk That Is Brewing
- Market Share Erosion – BYD surpassed Tesla in global BEV sales through Q3 2025 with 1.61M units vs. 1.22M, a 388K lead. Tesla’s Q3 2025 operating income fell 40% YoY, market share dropped to 41% from 49% Q3 2024, despite record 497K deliveries.
- FSD Regulatory Risk – NHTSA’s Oct 2025 probe covers 2.88M Teslas for FSD traffic violations, with 6 crashes causing injuries. European FSD rollout delayed until 2028. FSD (Supervised) logged 6B+ miles; Q3 2025 Autopilot showed 6.36M miles/crash.
- Raw Material Costs – Lithium prices rose 4.62% YoY to 74,800 CNY/T by Oct 2025. Nickel at $15,328 USD/T (Oct 2025) faces oversupply. Tesla’s 4680 cells are lowest cost/kWh, Texas lithium refinery expected Q4 2025.
Single stock can be risky, but there is a huge value to a broader diversified approach. If you seek an upside with less volatility than holding an individual stock, consider the High Quality Portfolio (HQ) – HQ has outperformed its benchmark – a combination of S&P 500, Russell, and S&P midcap index, and achieved returns exceeding 105% since its inception. Risk management is key – consider, what could long-term portfolio performance be if you blended 10% commodities, 10% gold, and 2% crypto with HQ’s performance metrics.
Is Risk Showing Up In Financials Yet?
It certainly helps mitigate the risk if the fundamentals check out. For details on TSLA Read Buy or Sell TSLA Stock. Below are a few numbers that matter.
- Revenue Growth: -1.6% LTM and 9.3% last 3-year average.
- Cash Generation: Nearly 7.1% free cash flow margin and 5.1% operating margin LTM.
- Valuation: Tesla stock trades at a P/E multiple of 285.3
- Opportunity vs S&P: Compared to S&P, you get higher valuation, higher 3 year average revenue growth, and lower margins
| TSLA | S&P Median | |
|---|---|---|
| Sector | Consumer Discretionary | – |
| Industry | Automobile Manufacturers | – |
| PE Ratio | 285.3 | 24.1 |
|
|
||
| LTM* Revenue Growth | -1.6% | 5.2% |
| 3Y Average Annual Revenue Growth | 9.3% | 5.3% |
|
|
||
| LTM* Operating Margin | 5.1% | 18.7% |
| 3Y Average Operating Margin | 8.3% | 17.8% |
| LTM* Free Cash Flow Margin | 7.1% | 13.3% |
*LTM: Last Twelve Months
How Bad Can It Really Get?
Looking at Tesla’s past market dips helps put its risk in perspective. The 2018 correction wiped about 53.5% off its peak, while the Covid pandemic saw an even steeper drop of 60.6%. The inflation shock hit the hardest with a 73.6% fall from top to bottom. Even with strong fundamentals and hype around the name, Tesla hasn’t been immune to big sell-offs during tough market times. It’s a reminder that no stock, no matter how popular, is fully shielded from major downturns.
But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, and outlook changes. Read TSLA Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.