Tesla Shares Tumble. Is It Time to Buy the Dip or Run for the Hills?
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What the data shows is What caught my attention is Tesla (TSLA 3. Moreover, 49%) has long been a stock that's traded more on the vision of its founder Elon...
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July 28, 2025
05:05 AM
The Motley Fool
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What the data shows is What caught my attention is Tesla (TSLA 3
Moreover, 49%) has long been a stock that's traded more on the vision of its founder Elon Musk than on its actual fundamentals, considering recent developments
Nevertheless, However, with the stock sinking ing Tesla's lackluster second-quarter earnings report -- despite more big mises around robotaxis and robots -- reality might finally be catching up to it
Additionally, Musk has done a lot of brand damage to Tesla over the past six months or so, in this volatile climate
His funding of President Donald Trump's campaign and overseeing the Department of Government Efficiency (DOGE) angered many liberal-leaning consumers
He then later got in a very public feud with the President he helped get elected, alienating himself and Tesla from many conservatives, as well
Moreover, Furthermore, The fallout could be seen in Tesla's Q2 numbers, while tariffs also stung the company
Meanwhile, it will soon see an even potentially bigger headwind due to the expiration of the U, amid market uncertainty
Electric vehicle (EV) credit by the end of third-quarter 2025
Its core auto is struggling For the second straight quarter, Tesla saw big declines in its core auto
After a 13% drop in deries in the first quarter, deries fell by the same amount in Q2
At the same time, Model 3 and Model Y deries decreased by 12%, while other models plunged by 52%
Meanwhile, Tesla's auto revenue plunged 16% to $16. 7 billion in the quarter
Within its auto revenue, its regulatory credits, which are pure gross margin, fell by more than half to $429 million
In contrast, Not surprisingly, this affected Tesla's fitability in the quarter (which is quite significant) (which is quite significant)
Even worse for the company is that many of these regulatory credits will soon be going away
Trump's "Big Beautiful Bill" will eliminate the current federal $7,500 EV tax credit at the end of September
As a result, Musk admitted that the company could be in for a "few rough quarters" ahead
Overall, Tesla's revenue fell 12% to $22 (noteworthy indeed)
However, Its energy generation and storage revenue dropped 7% to $2. 8 billion, while its service revenue climbed 17% to nearly $3
Adjusted earnings per sank 23% to $0. 40, while its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) declined by 7% to $3 (which is quite significant)
Tesla's cash flow is also starting to take a hit, in light of current trends
Its operating cash flow sank 30% to $2
Additionally, 5 billion, while its free cash flow cratered by 89% to $146 million
Moreover, Image source: Getty Images
More big mises Given Tesla's poor operating results, it was not surprising that Musk and the rest of management directed the conversation toward Tesla's big bets on autonomous driving and robotics
Musk claimed that Tesla will expand its autonomous ride-hailing service to cover half of the U
Population by the end of this year, pending regulatory apval, amid market uncertainty
Moreover, Moreover, Now, of course, such a statement makes little sense, given current economic conditions
Additionally, The company is currently only testing a small geofenced area in Austin, Texas, with safety drivers, and it has already had a number of safety issues in this small pilot, in this volatile climate
Its nology appears nowhere close to ready to be adopted in cities countrywide
Nevertheless, But let's say, for argument's sake, that the nology and regulatory apvals work out
What the re reveals is company would then need hundreds of thousands of Level 4 autonomous driving vehicles on the road (not its current Level 2 vehicles) (this bears monitoring)
Beyond that, it would also need service and cleaning centers, as well as charging infrastructure in place to handle a fleet of that size
Conversely, It would also need to have a consumer-facing platform that can handle things pre-trip pricing, dynamic fare calculations, disputes, and refunds
There's no evidence that Tesla has any of this in place, given current economic conditions
However, Meanwhile, Musk continued to sing the praises of his Optimus robot, saying it will be Tesla's biggest duct ever
He said Optimus 3 has an "exquisite" design with no significant flaws (which is quite significant)
He's looking to have a totype of the new robot by the end of this year and then scale duction next year
Moreover, He then wants to be able to duce 1 million Optimus robots a year within five years, given the current landscape
Once again, this seems ambitious
Additionally, 33%) is currently an AI robotics leader, and companies Boston Dynamics have showcased robots with advanced mobility, so robots can be hugely useful
However, all Tesla has ever demonstrated is a humanoid robot that could only do carefully choreographed tasks
Today, most factory automation is done by specialized, fixed-purpose robots, in today's market environment
The use case for a humanoid robot is still very questionable
Should investors buy the dip
Even after the stock pullback, Tesla's stock trades at a forward price-to-earnings ratio (P/E) of over 170x based on 2025 analyst estimates, while its fitable auto peers -- Ford, General Motors, and Stellantis -- generally have multiples of 10 or less, amid market uncertainty
On the other hand, With its core auto struggling, this indicates that the bulk of Tesla's market cap is predicated on ambitions that may or may not pan out
On the other hand, Given the company's track record of overmising and under-dering, this is not a bet I'd make.
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