Should You Get Too Optimistic on Tesla After Musk's $1B Bet?

Tesla TSLA grabbed headlines on Monday after CEO Elon Musk scooped up $1 billion worth of company shares, signaling a renewed focus. Retail investors cheered it as a vote of confidence, sending the stock up about 4% to cross the $400 mark. The rally continued yesterday, fueled by Musk’s cheeky post on X: “Daddy is very much home.”But here’s the question— are investors reading too much into Musk’s billion-dollar buy? What has really changed fundamentally for Tesla? Yes, critics argued Musk was stretched too thin, and his divided attention hurt Tesla. But hasn’t much of that damage already been done?Tesla’s core electric vehicle (EV) business is struggling. The company is now pivoting big into artificial intelligence (AI), autonomous driving and robotics. Indeed, these are bold plans but also early bets that may take years to pay off. If Musk succeeds, those who ignored his conviction might regret it. Still, is now the right time to double down on Tesla stock just because Musk is? Let’s discuss.TSLA Making Serious Attempts to Rekindle Investor ConfidenceEarlier this month, Tesla unveiled its Master Plan Part IV, doubling down on the familiar buzzwords: AI, robotics, large-scale autonomy, and energy. Musk has been talking about these themes for years, and this latest plan felt more like old promises in a shiny new box than a fresh strategy. (Tesla Master Plan IV: Does It Really Change TSLA's Investment Case?)Not long after, Tesla proposed a historic new pay package for Musk— a jaw-dropping $975 billion stock award tied to ambitious milestones. To unlock the full payout, Tesla would need to deliver on these goals— boosting adjusted EBITDA 25-fold to $400 billion by 2035, hitting a market value of $8.5 trillion (from just over $1.3 trillion today). Additionally, it will have to sell 20 million vehicles by 2035, add 10 million Full Self-Driving subscriptions, deploy 1 million robotaxis and deliver 1 million humanoid robots. (Can Musk's $1T Pay Package Keep Tesla on the Fast Track?)It’s bold, no doubt. The board is essentially betting that Musk’s leadership is the only way Tesla can successfully pivot into AI, autonomous vehicles and robotics. His recent $1 billion share purchase only adds to that narrative of commitment.While these moves send positive signals, they also smack of desperation. Tesla has had a rough start to the year, with rising headwinds and a brand that no longer commands the same magic it once did. These big announcements— whether the Master Plan or Musk’s oversized pay package—seem aimed as much at shoring up investor sentiment as at laying a practical roadmap.And yes, the strategy seems to be working. Tesla has erased its earlier 2025 losses, with shares now up about 4% year to date. Image Source: Zacks Investment ResearchBut should investors look past Tesla’s ongoing challenges and place blind faith in promises that may take years to materialize?Tesla’s High Hopes Face Harsh RealityAfter Tesla’s first-ever annual delivery decline in 2024, 2025 hasn’t exactly started on a high note. First-quarter deliveries fell 13% year over year, followed by another 13.4% drop in the second quarter. Meanwhile, China’s EV powerhouse BYD Co Ltd BYDDY has continued to challenge Tesla at every turn. BYD delivered over 416,000 BEVs in the first quarter of 2025, beating Tesla’s 336,000, and then reported 606,993 BEVs in the second quarter — up 42.5% year over year— marking its third consecutive quarter outpacing Tesla in battery EV sales.The decline isn’t just in units sold. Tesla reported its sharpest quarterly revenue drop in more than a decade, and profitability is under pressure. On the second-quarter earnings call, Musk himself warned of rough quarters ahead.Yet Tesla’s recent plans to ramp up production at its Giga Berlin factory for the Model Y — a surprising move given that European sales have now fallen for eight straight months. Add in intensifying competition from Chinese rivals like BYD, years without a meaningful new product, and the looming end of the $7,500 EV tax credit under recent policy shifts, and it’s hard not to question the timing. The policy shift by U.S. President Trump also removes the key incentive behind Tesla’s regulatory credit windfall. (Tesla's Regulatory Credit Cash Cow Is Fading Fast: Why it Matters).Amid all these challenges, Tesla is pinning massive hopes on robotaxis. But Alphabet’s GOOGL Waymo is already far ahead, with years of real-world testing and strong partnerships. Backed by Alphabet’s resources and long-term commitment, Waymo is the clear frontrunner in this space, delivering around 250,000 paid rides every week. Meanwhile, Tesla’s June robotaxi debut in Austin has been underwhelming, leaving the company with a long catch-up to do if it hopes to rival Alphabet.A Look at Tesla’s ValuationFrom a valuation perspective, Tesla looks overvalued. Based on its price/sales ratio, the company is trading at a forward sales multiple of 12.48, way higher than the industry as well as its own 5-year average. TSLA has a Value Score of D. Image Source: Zacks Investment ResearchWhat Do Zacks Estimates for TSLA Say?The Zacks Consensus Estimate for Tesla’s 2025 sales and EPS implies a year-over-year contraction of 5.2% and 31.4%, respectively. See how the company’s estimates have been revised over the past 60 days. Image Source: Zacks Investment ResearchThe Hype Seems OverblownTesla’s latest moves — Musk’s $1 billion share purchase, his historic pay package and the Master Plan IV — may have fueled investor optimism, but they feel more like attempts to prop up confidence than signals of immediate fundamental change. Short-term gains are real, but the reality remains — Tesla faces declining sales, fierce competition, and has ambitious projects, from robotaxis to AI — that could take years to meaningfully impact the business.Musk’s faith in Tesla is undeniable. But while he may be all in, investors need more clarity on tangible progress before jumping on board. They should hold off on betting blindly on his confidence alone. In fact, with shares having rallied over 20% in just the past five sessions, it might even make sense to lock in some gains rather than chase the hype.Tesla currently carries a Zacks Rank #4 (Sell).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Radical New Technology Could Hand Investors Huge GainsQuantum Computing is the next technological revolution, and it could be even more advanced than AI.While some believed the technology was years away, it is already present and moving fast. Large hyperscalers, such as Microsoft, Google, Amazon, Oracle, and even Meta and Tesla, are scrambling to integrate quantum computing into their infrastructure.Senior Stock Strategist Kevin Cook reveals 7 carefully selected stocks poised to dominate the quantum computing landscape in his report, Beyond AI: The Quantum Leap in Computing Power.Kevin was among the early experts who recognized NVIDIA's enormous potential back in 2016. Now, he has keyed in on what could be "the next big thing" in quantum computing supremacy. Today, you have a rare chance to position your portfolio at the forefront of this opportunity.See Top Quantum Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Tesla, Inc. (TSLA): Free Stock Analysis Report Alphabet Inc. (GOOGL): Free Stock Analysis Report Byd Co., Ltd. (BYDDY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks