Why Tesla Stock is Really Crashing in 2025 - Sell NOW or Buy More?

Investors have slammed Tesla after their last earnings report, and Tesla's now down almost 20% in the year, and I'm going to show you where I think Tesla will be 10 years from now, and the price I would pay for the stock today. This is one of the most talked about and most controversial stocks on the planet, and Tesla has been struggling as of late. The stock has been struggling. It's well below its all-time highs, and if you bought Tesla a mere four years ago thinking it would change your life, it's practically even since then, even though the business fundamentals have gotten better. Deliveries are falling short, growth has slowed, and while Elon's been promising the moon from solar panels and self-driving software to humanoid robots, we haven't seen those game changers hit the bottom line quite yet. Now, guys, this is where things get interesting. When the hype fades and reality sets in, that's when we step in, because the market is highly emotional. Investors bail at the first sign of trouble, but we're not interested in hype, and we're not interested in throwing shade on Tesla. We're interested in one thing and one thing only. Is Tesla finally trading below its intrinsic value? We're going to break down these numbers. We're going to break down the fundamentals and the real risks behind the headlines. Is this a buying opportunity, or is it time to move on or continue to be patient? Let's find out. This is principle-driven investing, limited emotions, just real investing logic. Now, let's take a step back and bring in a voice of reason, Peter Lynch. Lynch ran one of the best performing mutual fund of the 1980s, and he had a powerful rule for investors, know what you own. Simple, course, but it's so important, especially when a stock is falling. If you bought Tesla thinking it would dominate electric vehicles, expand to solar, lead the charge on autonomous driving, then ask yourself, is the business delivering on those promises, or is the stock just down because Wall Street's having a mood swing? Lynch expected his stocks to drop 30% to 50% sometimes. He didn't panic. In fact, Warren Buffett even says, if you can't stomach your stock falling 50%, you shouldn't own individual stocks, because a falling stock price doesn't mean that the business is failing necessarily. Markets overreact. Headlines will exaggerate. News follows the stock price, and that gets investors scared. But if the company is still making money, if it's still growing, and the long-term outlook is intact, that's often where the opportunities lie. But guess what? Even if the business isn't growing, is that temporary or is it permanent? Lynch always said, the key to making money in stocks is not to get scared out of them. But here's the catch. You can't just blindly buy the dip. There's more nuance to this. You've got to understand why the stock is down. Is it short-term noise or is something fundamentally broken? If you're not sure, dig deeper. Are earnings falling? Are insiders buying? Has the company taken on bad debt or lost its edge? Now, this is hard to do when you start to see the stock fall, because all the stories will start popping up to justify the stock falling. But your job is to keep that noise out. If the fundamentals are still intact, Lynch would say, this might be the best buying opportunity you're going to get. The best stock to buy may be the one you already own, but only if your original thesis still holds. If it doesn't, you need to be able to walk away. There's no shame in that. So before you sell in fear or buy just because it's cheaper, channel your inner Peter Lynch. Ask, do I know what I own? Do I still believe in the long run? In fact, long-term wealth is built not through hype, but through discipline and understanding. So what's really going on with Tesla stock? Tesla used to be one of the fastest growing, most talked about companies in the world. In fact, a mere 2022, three years ago, Cathie Wood expected that Tesla would sell 10 million cars in 2026. Mo, how many cars are they going to sell in 2025? I believe it's around 1.7 million. Yeah. 1.7 million. Is it possible they sell 10 million cars in 2026? It's possible they sell a hundred million cars in 2026. That's exactly the right response. I would equate those two probabilities as virtually the same. Guys, that's not too long ago. That was a mere three years ago, but now the stock is struggling and many investors are wondering why. What we said in the past was, guys, before you value them as a company that sells 10 million cars, let them sell 10 million cars. Tesla used to grow over its revenue 20, 30, 40, 50% a year very consistently, but that's not happening anymore. Car deliveries have flattened in many markets and competition, especially in China, is heating up. At the same time, demand for electric vehicles isn't growing as fast as many expected. In fact, I saw that Ford just recently said, hey, we're pulling back how much we're building electric vehicles. Now, I believe electric vehicles are here to stay and I love them, but you've got to remember that nothing is ever truly as easy as it sounds. If it is, there's probably some catch to it. Let's not forget that our good friend Elon Musk used to be the champion of the left. Then they realized his real political beliefs and all of a sudden, they all of a sudden hate Tesla. That's why their sales have fallen so considerably. Elon and Tesla are known for being innovative, but at the end of the day, they sell cars and the car business is an extremely difficult business. It's expensive to run, has tons of competition, and profits are usually very, very thin, but a lot of investors want to say that Tesla is a software tech company. I cannot wait to see the hate in the comments below about how amazing Tesla is as a tech company, but guys, over 90% of its revenue comes from selling cars. The tech portion of their business, full self-driving, it started at $12,000. Mo, how many people bought it? Not many. So you know what they did? Like, okay, fine. It's $8,000 now. How many people bought it? Not a lot. Okay. So they said, okay, how about this? It's $99 a month after you've had three months for free. How many people signed up after three months? 1%? Mo, you're a dick. 2%. 2%. So bearish. Now guys, Microsoft, if Microsoft gave away Microsoft office for free for three months and then got a 2% conversion, how big would Microsoft be right now? Well, I'd tell you how big they'd be. Their stock would be selling for about $0 per share. Obviously I'm exaggerating here, but the point is if this is a tech company, if this is a software business, where the hell are the sales? Now what's interesting is the story has shifted. No, no, no, Paul. It's not software. It's a data business. Okay. Sounds good. Whatever story you guys need to go meander through the river is about. Just go ahead and do it. The way I look at it is they have a potential software component. They have a huge car component. You should value both of them, but the software component ain't looking good. Tesla has made a lot bold promises. That's self-driving software, robo-taxis, humanoid robots. But many of these products are still in development, not even generating much revenue yet. Guys, the cyber truck came late and is being produced in limited numbers. In fact, they've cut production. And like we talked about before, Elon Musk is the face of the Tesla. That's a huge risk because his public comments are making things very difficult for the company to progress. To stay competitive, Tesla has been cutting prices on its vehicles. That helps sales, but it kills profits. Operating incomes down, battery costs aren't dropping fast enough to make up for it. Tesla is still an innovative and powerful brand, but that doesn't automatically make it a good stock to buy at any price. So what's the right price for Tesla? That's what we're here to figure out. So Mo, it's a $1 trillion company market cap wise, which means if you wanted to buy every single share outstanding, it'd be a $1 trillion. What's interesting is their enterprise value is basically the same, which is very rare for a car company. So you're probably wondering what the hell does this mean? This is essentially the debt. The difference between market cap and enterprise value is essentially the debt. So they essentially have very little debt to no debt. That's incredible. Now, I will say their average five-year cashflow is 4.6 billion. Last year, 5.6. So they still have a higher free cash on the last five-year average. Go ahead, Mo. Let's make a comparison to Ford. Yeah. 43.3 billion dollar market cap enterprise value, 275.3 billion. So there's, now you can see the massive discrepancy of a car company. But let me ask you this. What's the gross margin on Ford? 7.19%. 7.19? Yeah. Oh, wow. They're at 17 and a half. That's great. That is good. So much higher. By the way, what gross margin means, guys, is every car they sell, Tesla basically gets 17 and a half percent of that as profit before overhead and taxes. Ford gets 7%. So there are issues there. Look at this growth rate. 38% a year for the last 10 years, 30% a year for the last five, 11% a year for the last three. Man, guys, I mean, it's an exciting business. But the question becomes, let me ask this question, Mo. Price to sales ratio on Tesla is 11.75. What this means is for every dollar of sales, how much you have to pay for it? This is $11.75 to buy every $1 of sales. What is it for Ford? 23 cents. 23 cents versus 0.23. This is almost 60 times higher. That's my concern. With a company that has 90% plus of its sales coming from cars, but yet it's valued significantly higher than other car businesses. Now keep in mind, Ford sold four and a half million cars in 2024 worldwide. Tesla sold 1.7 or 1.8 million. So they're nipping at the heels, but it's not like Tesla sold 100,000 cars last year and they have a 50X growth. If they sold 10 million cars, it'd be twice the size of Ford, which is still a big size. Here's the other challenge for Tesla when it comes to that. You can't just have an EV anywhere. You have to have the capability to get around. With a Ford, it's just gasoline. Most of it is. Yeah, they sell the vast majority and they've said we are pivoting away from selling as many electric vehicles. They've converted some of their factories that are making electric vehicles in back into combustion engine vehicles. Yeah. So that makes it a little more difficult for Tesla. It does. Now we have 27 community members who have rated Tesla an average of a sell price. Wow. 11% of a buy and 11% have a strong buy. And this is for the last six months. All right. So if you're in the community, go in there and vote on that. The eight pillars. Okay. We have four X's and four checks. Now, obviously the valuation, five-year PE, five-year price of free cashflow, very high. That in itself does not tell me it's overpriced. It is very high number. So it's very likely overpriced, but you've got to remember that Tesla does have more growth potential. Cashflow, revenue growth, net income. And of course, we talked about the debt being very low comparatively. Now let's see what analysts think about this company. This ought to be good. Oh, wow. Huge growth. Earnings per share growth from $2 to $9.73 over the next four or five years. That's four and a half times, almost five times more profit. That is huge, huge growth potential. With revenue growth going from 99 billions called a hundred billion to 250 billion guys, big time growth here. Big time growth. Now here's my thing. Let's say they're right. And let's say you value Tesla at 20 times earnings. That makes it still $190 stock four years from now. And it's 305 right now. It's 305 right now. That's a concern. But again, analysts could be wrong here. And we're not looking at this for the next five years. We're looking at this for the next 10 years or more. So you've got to remember that. Now, if you're new to investing or to our channel, if this feels overwhelming, you're not alone. We're here to simplify all of this. I have an absolutely free PDF that you can get sent to your email in a matter of one minute. All the key metrics here explained to you so you can understand them and give you a strong foundation to help you level up your investing game. Whether you're a beginner or advanced, I want us speaking the same language. So no matter what your level of investing, click the link below and we will email you the PDF absolutely for free. And guys, we're getting very close to talking about the price that we pay for Tesla stock. But before we get there, another way to make money in stocks is looking at the charts. Yes, I believe in charts, just like Michael Burry does. Mo is our in-house chart expert. It's a great way to get involved in deploying your capital and make money without worrying about the fundamentals. Mo, take it away. So these colorful lines here, these are the moving averages. And you can see that you have the 200, 100, 25, and 50 day moving average. And you can see it's just sandwiched in there. So for me, you can trade up and down. You can swing trade. So day to day, try to make money bouncing around in those moving averages. If it was me, I have a thing against trading Tesla. It's just so valid. I like being either above these moving averages or below of them because when it gets inside of them, the algorithm trades from Wall Street just go crazy. It bounces around in there. I would wait until it gets above or below, but if it gets above, you're going to be able to run it to about, I don't know, $370 a share if it gets below $260 a share. But just avoid those moving averages when it comes to Tesla. You can just get eaten alive. It's just so volatile. Okay. So we looked at the charts. We looked at all the data. Now the goal here is to put the story and the numbers together. We put them in our stock analyzer tool, which allows us to then spit out a price based on our assumptions of what the right price to pay for Tesla is today. Now, so far, what I've seen on Tesla as a company has a lot of potential. I love it, but price is going to be the big driver for me. So Mo, I did a 10 year analysis. I did 5, 10, and 15% revenue growth. Might be a little low. Could be. So I'm actually going to change this. I'm going to go with 6, 12, and 18%. Profit margin, I did 7, 11, and 15. I'm going to assume some of their high margin things that we haven't seen start to play out. Robo taxis. Whatever it is. Robots. Are you factoring in that I'm going to buy like 12 robots to work on my property? Oh, I'm a hundred percent going to buy robots like crazy. And it's funny. My wife is like, we're not going to have robots in the house. I'm like 1 million percent. We're going to have robots in the house. Robots are going to outnumber humans in the house. Absolutely have to. And the reason being is I don't have to tell, I don't have to worry about a smoke break for a robot. I don't have to worry about them having a bad day. I don't have to worry about any of that stuff. I just go do my laundry. Absolutely done. Okay. Profit margin. We already went through that. Now what PE would you assign to the company 10 years from now? I put 15, 18, and 21. And I know people are going to say that's too low. The average historically is 15 or 16. I think we'd agree. Tesla deserves a premium. Yes. What premium? I don't know. I mean, you can go higher, go 18, 21, 24. What about 15, 20, and 25? Okay. Cause I still want to stay low on the 15. And guys, finally, what's my desired return? I put 9% in now guys, this is to find the intrinsic value, the market value of the business. If you want to buy an individual company though, you need to have a margin of safety, which means a higher desired return. So I put all of this in there. And like I said, I like what I see, but price versus value is what really matters. And believe it or not, 25 years ago, I was chasing hot stocks, following tips, getting caught up in the hype, believing just the story mattered. And all that was a hope that something would stick, but that's not investing. That's gambling. And that's exactly why I created Everything Money. To give people like teenage Paul, strategy and community that I never had, but most importantly, the tools that I never had. When you join Everything Money, you're not just getting all these powerful tools and the community and the world famous stock analyzer, you're getting a foundation. We integrate you into the community by having you watch courses so that we all have the same way of speaking. This is our great way of getting you engaged in our community of like-minded investors. Whose total goal is to get better at investing, to level up your investing, no matter where you are. That way you have the proper mindset and support alongside the software and tools. And guys, it's really exciting. We're about ready to add a brokerage platform so that you can connect your brokerage, whether it's Robinhood, Charles Schwab, whatever it is, into the software. So you can buy your stocks as you see them. It's just all making it easier than ever to level up your investing game all in one place. This is the next chapter of Everything Money and it's coming very soon. But the big key here is we only want serious investors. This is so important to hear this. If you're chasing for the next shiny object, please go away. We do not want you anywhere close to us. If you're the kind of person who wants to understand why, if you're the kind of person who likes to understand a process and stick with it and put in the work, we're the right place for you. If you're the opposite of that, stay away. But if you're committed to investing, if you're committed to learning, start your seven-day trial today. Click the link below, seven-day trial, and figure out why 83% of people who sign up for our seven-day trial end up signing up for the year. We have limited spots every day and we're very close talking behind the scenes to making an application based only as another way of weeding out people who don't want to learn. So if you're serious, this is your moment. Go sign up now. Moe, I hit the analyze button. The stock's currently at 303. I know this is going to be bad. Low price of 35, high price of 270, middle price of 106. Come haters. I don't know. It's just math guys. The end of the day, it's just math. I mean, you can go in there yourself, modify my assumptions, and go in there and decide what you think it's worth. But I just think this is a very, very difficult company to really bet on the future. Now, if you don't like this process, it might be something interesting you want to hear. Earlier this year, I picked seven stocks using the same value first strategy that we just talked about. I wanted to put them up against the Magnificent Seven. So my own personal Magnificent Seven. And as of July 31st, they're actually beating the real Magnificent Seven. Much to my surprise, because it's such short term, but click on the video on your screen to see which stocks made the list. They are all stocks that I personally own. And I think they're going to winning for years to come. Thank you for your time.