Tesla (TSLA:NASDAQ) stock continues to be popular within the retail investor community. On platforms such as Robinhood and eToro, the EV stock is continually one of the most bought securities.
However, before you follow the herd and buy the stock for your own portfolio, there are some things you should know. Because right now, there are some major risks to the investment case that a lot of investors appear to be ignoring.
Tesla’s sales across Europe are plummeting
Let’s start with the fact that Tesla’s sales are plummeting across Europe. For April, Tesla sales were down 81% year on year in Sweden, down 74% in the Netherlands, down 67% in Denmark, down 59% in France, and down 33% in Portugal.
And this wasn’t just a one-off bad month. For the first quarter of 2025, Tesla’s sales slumped 37.2% in Europe while sales of all fully-electric cars increased 28%.
It seems that there are two main factors at play here. One is anger towards Tesla CEO Elon Musk. He has upset a lot of people with his far-right comments recently. As a result, consumers are boycotting the company’s products.
Another is the arrival of slick new EVs from other brands such as BYD, BMW, and Mercedes-Benz. Many of these EVs have cutting-edge technology that rivals the tech in Tesla’s vehicles.
It’s worth pointing out that in 2024, Europe accounted for almost 20% of Tesla’s deliveries. So, the weakness here is a major risk to the company’s financial performance.
Wall Street expects zero growth in 2025
Given the poor sales numbers, analysts are not expecting much growth from Tesla in the near term. For 2025, Wall Street expects revenue to drop to $97.4 billion from $97.7 billion in 2024.
As for earnings per share (EPS), they are expected to come in at $1.98 this year, down 10% from the EPS figure posted for 2024 ($2.19). That’s the weakest EPS growth forecast among the ‘Magnificent 7’ companies – most other Mag 7 stocks are expected to generate EPS growth of at least 10% this year.
Tesla has the highest valuation among the Magnificent 7
Yet despite the lack of the top- and bottom-line growth, Tesla stock is trading at a high valuation at present. At today’s share price of $350, its forward-looking price-to-earnings (P/E) ratio is about 177.
That’s the highest earnings multiple within the Mag 7 by a wide margin. For reference, Nvidia and Amazon are trading on forward-looking P/E ratios of 31 and 33 respectively.
This high valuation obviously adds a lot of risk for investors. Right now, the fundamentals don’t support the company’s valuation.
Tesla stock is overbought
Finally, it’s worth touching on the stock’s RSI or relative strength index. RSI is a momentum indicator used in technical analysis that measures the magnitude of recent share price changes to evaluate ‘overbought’ or ‘oversold’ conditions in the price of a stock or other asset. At present, Tesla has an RSI of 70. That’s very high – when a stock’s RSI is near 70, the stock is generally considered to be overbought.
Expect share price volatility
Now, these factors don’t necessarily indicate that Tesla stock is about to tank. This is a stock that tends to trade on sentiment and not fundamentals.
However, all of these factors add risk to the investment case. And put together, they paint a picture of heightened volatility for Tesla’s future share price action.
Based in London, Edward is a distinguished investment writer with an extensive client portfolio comprising a diverse array of prominent financial services firms across the globe. With over 15 years of hands-on experience in private wealth management and institutional asset management, both in the UK and Australia, he possesses a profound understanding of the finance industry.
Before establishing himself as a writer, Edward earned a Commerce degree from the prestigious University of Melbourne. Complementing his academic background, he holds the esteemed Investment Management Certificate (IMC) and is a proud holder of the Chartered Financial Analyst (CFA) qualification.
Widely recognized as a sought-after investment expert, Edward’s insightful perspectives and analyses have been featured on sites such as BlackRock, Credit Suisse, WisdomTree, Motley Fool, eToro, and CMC Markets, among others.
You can contact Ed at edward@goodmoneyguide.com
