Tesla (NASDAQ: TSLA)’s stock rose by 35%, driven by heightened investor enthusiasm, even as revenues experienced a minor decline and profit margins contracted. The increase can be attributed to a couple of factors.
Tesla co-founder and CEO Elon Musk gestures while introducing the newly unveiled all-electric battery-powered Tesla Cybertruck at Tesla Design Center in Hawthorne, California on November 21, 2019. (Photo by Frederic J. BROWN / AFP) (Photo by FREDERIC J. BROWN/AFP via Getty Images)
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Over the last quarter, Tesla’s delivery performance was better than expected, as customers rushed to capture expiring tax credits. Elon Musk’s renewed focus on Tesla after his brief government stint —backed by a massive new performance-based compensation plan— has also boosted investor sentiment. At the same time, optimism around Tesla’s role in “physical AI” – leveraging its strengths in autonomous driving, robotics, and large-scale manufacturing – is reigniting the stock’s bull case.
Tesla Summary
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So how do we numerically break down the move? The stock price increased by 35%, propelled by a 40% rise in its P/E ratio, in spite of a 3.1% decrease in revenue and a 0.5% decline in net margin. Let’s look into the reasons behind these changes.
Before diving into the events that resulted in the stock surge, here’s what market insights suggest: Individual stocks can be risky, but a diversified strategy offers substantial benefits, as seen with the Trefis High Quality Portfolio. Trefis collaborates with Empirical Asset Management – a wealth manager based in the Boston area – whose asset allocation strategies have produced positive returns during the 2008-09 period when the S&P plummeted over 40%. Empirical has integrated the Trefis HQ Portfolio into their asset allocation framework to deliver better returns with reduced risk compared to the benchmark index; resulting in less volatility, as demonstrated by HQ Portfolio performance metrics.
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Reasons Behind Tesla Stock Movement
- Record Q3 Deliveries: Tesla achieved a record of 497,099 vehicles delivered in Q3 2025, exceeding what analysts predicted.
- Tax Credit Expiry: The $7,500 federal EV tax credit expired on September 30, leading to an increase in demand in Q3, which raises concerns for Q4.
- New Low-Cost Models: Lower-priced Model Y/3 launched on October 7. The stock dipped as deeper price reductions were anticipated.
- Profit Margin Concerns: Pressure on margins due to price reductions and a 50% year-on-year fall in Q2 regulatory credits.
- Robotaxi/AI Optimism: Continued investor attention on the long-term prospects of robotaxis, FSD, and Optimus humanoid robots.
Our Current Assessment On TSLA Stock
Opinion: We currently view TSLA stock as unappealing. Why? Take a look at the complete narrative. Read Buy or Sell TSLA Stock to understand what shapes our present stance.
Risk: Nonetheless, Tesla is not exempt from significant declines. It plummeted around 54% during the 2018 correction, saw a 61% drop throughout the Covid pandemic, and faced the greatest hit during the inflation shock with a 74% decline. Even in crises that seemed less severe overall, Tesla’s retracements were still pronounced. Strong growth or hype has its limits—when markets fluctuate, the swings can be extreme.
Identifying winners consistently is not a straightforward task – especially given the volatility linked to individual stocks. Instead, the Trefis High Quality (HQ) Portfolio, which comprises 30 stocks, has a history of comfortably outperforming the S&P 500 over the last four years. Why is this the case? Collectively, HQ Portfolio stocks have offered improved returns with lower risk compared to the benchmark index; resulting in reduced volatility, as evidenced by HQ Portfolio performance metrics.