As we look ahead to 2025, the question of whether Tesla (TSLA) is more likely to thrive or fall remains a key topic of debate among investors and analysts. While the stock has surged significantly in late 2024, many remain cautious due to concerns over its high valuation and relatively modest near-term growth projections. However, despite these concerns, I hold a bullish stance on Tesla, believing that its innovative business model, strategic positioning, and upcoming breakthroughs—especially in autonomous driving and electric vehicles—will likely drive significant long-term growth.
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In this article, I’ll explore why I believe Tesla is poised to continue thriving in 2025, supported by deregulation, strong tailwinds from its leadership, and exciting product developments.
Deregulation and Elon Musk’s Influence as Strong Tailwinds
Much of the bullish thesis on Tesla for 2025 centers around the idea that the company stands to benefit significantly from the new administration of President-elect Donald Trump. This is due to the anticipated deregulatory environment, which includes a more business-friendly stance on tech. Such changes would reduce the regulatory hurdles that could otherwise slow innovation, particularly in the autonomous vehicle and AI sectors.
This narrative is a key pillar of the exaggerated optimism expressed by Wedbush analyst Dan Ives, who is confident that Tesla’s market cap will reach $2 trillion by 2025. Ives believes that Tesla’s initiatives in autonomous driving and AI could account for around $1 trillion of that valuation. With Trump back in the White House, he expects regulatory obstacles to be cleared, accelerating Tesla’s timeline to achieve major milestones in these areas.
Additionally, the Trump administration has already threatened significant tariffs on China and Mexico, where several large and relevant vehicle manufacturers are based. These tariffs, if implemented, could benefit Tesla while hurting its competitors. Furthermore, the administration may increase EV tax credits to make electric vehicles more affordable, further boosting Tesla’s sales.
Tesla’s Low-Cost EV Drives the Path to Profitability
Another reason for investor optimism about Tesla in 2025 is the strong potential of its upcoming low-cost electric vehicle (EV) as a major growth driver. Tesla has confirmed that the new model, expected to launch in the first half of 2025, will be priced under $30,000—closely aligned with the long-discussed $25,000 price point. However, questions remain as to whether Tesla can deliver such an affordable vehicle while maintaining profitability, especially amid inflationary pressures and rising manufacturing costs.
For years, Tesla teased investors with the prospect of a $25,000 model. Nonetheless, in recent quarters, management has suggested that this price point is no longer realistic. Instead, the company’s focus has shifted to higher-margin products, such as its autonomous driving technology and the Optimus robot, which management believes will be the true drivers of future valuation. While these products remain speculative, Tesla’s core automotive business continues to outperform competitors in terms of revenue, profit, and margins.
If Tesla successfully delivers a vehicle priced below $30,000 that generates positive gross margins, it would be a significant achievement. Not only would it mark a rare instance of Tesla meeting its own ambitious targets, but it would also solidify the company’s position as the leading EV manufacturer—well ahead of its competitors in both performance and profitability.
A $50 Billion Opportunity Driving Future Growth
The other major growth catalyst for Tesla’s positive outlook is its potential in the Mobility-as-a-Services (MaaS) industry, projected to reach $50 billion by 2032, which is expected to generate significant incremental top-line growth for the company. While many analysts consider Tesla’s stock as expensive given its relatively modest growth prospects for Fiscal Year 2024—forecasting just 3% year-over-year revenue growth—and for Fiscal 2025, where Tesla is projected to grow by 16.5%, this is likely just the beginning of a more substantial growth trajectory.
From Fiscal 2026 onward, growth is expected to accelerate significantly, with a projected increase of 17.6%. Similarly, although Tesla’s EPS are expected to shrink by 20.3% in Fiscal 2024, analysts anticipate a rebound in Fiscal 2025 with a 31.7% growth in EPS, followed by another 22.7% increase in Fiscal 2026.
In its most recent quarter, around 80% of Tesla’s revenues (approximately $20 billion) came from automotive sales, regulatory credits, and leasing. The remaining 20% was derived from energy generation and storage and services. With the rise of Full Self-Driving (FSD) technology and the potential launch of robotaxis, Tesla is poised to diversify its revenue streams, reducing its reliance on car sales and positioning itself for long-term growth.
When TSLA’s Valuation Could Be Valid
Tesla stock has gained more than 85% in 2024, and while I maintain a bullish outlook on the stock based on its momentum, the stretched valuation presents a significant risk to the investment thesis. Tesla is currently trading at a forward P/E ratio of 186x, the highest level in its history.
That said, one should consider that, given Tesla’s history of trading at high premium multiples, the stock is not priced solely based on fundamentals. Several factors support this elevated valuation, including: (1) Elon Musk, the wealthiest person in the world, serving as CEO and his close ties to the Trump administration; (2) Tesla’s position as the most successful EV company, with the largest revenues, cash flows, and profitability—far surpassing its competitors; and (3) the company’s strong position to dominate the $50 billion robotaxi market, which is expected to begin taking shape by 2025.
These factors go beyond traditional financial metrics and help explain why Tesla’s valuation is so high, even in the face of relatively modest short-term growth projections.
Is TSLA a Good Buy?
At TipRanks, the consensus among Wall Street analysts does not suggest that TSLA is a strong buy. The stock is rated as a Hold, with 13 analysts having a bullish outlook, 12 neutral, and 9 bearish. The average price target is $287.10, implying a potential downside of 34.8%.
Conclusion
While bears point to concerns over Tesla’s valuation and growth prospects not aligning, the stock is likely to have more positives than negatives in 2025. However, it faces a high bar, which could lead to significant volatility along the way. That said, in my view, this journey is ultimately a winning one. The favorable regulatory environment, combined with the company’s progress in AI and driverless car technology, are strong tailwinds that could sustain Tesla’s bullish momentum for an extended period.
