Tesla (TSLA) has spent years pushing the boundaries of autonomy, evolving from an EV pioneer into a full-fledged AI-driven ecosystem. Under Elon Musk, it is no longer just about cars—Full Self-Driving (FSD) and robotaxis now anchor a bigger vision where vehicles don’t just move but learn, adapt, and generate value over time.
The idea is simple but bold—a world where most vehicles are autonomous, and Tesla’s fleet becomes a revenue engine on wheels. That’s where Morgan Stanley analyst Andrew Percoco sees a “flywheel” forming—robotaxi miles improve FSD, which boosts demand, lifts margins, and feeds back into growth. Even with near-term cash burn, the long game could be powerful.
Still, with TSLA stock down over 25% from its highs and struggling through 2026, are investors catching an early opportunity or stepping into something that still needs time to prove itself?
Founded in 2003, Texas-based Tesla has become far more than just an electric vehicle (EV) maker. Under Elon Musk’s relentless vision, it fuses EVs, battery storage, solar energy, and early-stage robotics into a single, future-facing ecosystem. Operating across more than 30 countries in North America, Europe, and Asia, Tesla continues to shape the global conversation around clean mobility and next-generation infrastructure. Its market capitalization currently stands at around $1.43 trillion.
Tesla’s stock journey from 2025 into early 2026 has been anything but smooth. It started the year under pressure, as slowing EV demand, tariff concerns, and constant headlines around Elon Musk weighed on investor sentiment. For months, TSLA mostly moved sideways, stuck in a narrow range with no clear direction.
Then sentiment flipped almost suddenly. Musk reignited optimism after locking in a massive compensation package and making his first personal share purchase in five years, deploying nearly $1 billion. That move helped erase earlier losses quickly, and momentum began to rebuild.
However, the rally did not fully hold. TSLA stock peaked at $498.33 in December but has since pulled back to around $370 by March, down roughly 25% from its highs and about 17% on a year-to-date (YTD) basis. Ongoing macro headwinds, softer delivery growth, and rising costs continue to weigh on the stock.
Technically, trading volumes have thinned, and with the 14-day RSI slipping to around 33, momentum appears to be fading rather than signaling a strong rebound.
Even after the recent dip, TSLA stock is not exactly cheap. It is priced at 277.8 times forward adjusted earnings, still trading at a steep premium, far above the broader sector average. Basically, the market is already pricing in massive future growth. So, the stock leaves little room for disappointment—Tesla now has to deliver big on its ambitions to truly justify that kind of pricing.
Tesla’s fourth-quarter earnings report for fiscal 2025, released in late January 2026, delivered numbers that, on the surface, told a slightly uneasy tale. During the quarter, revenue came in at $24.9 billion, down 3% year-over-year (YoY), while adjusted earnings slipped 17% annually to $0.50 per share. It marked Tesla’s third straight quarter of declining revenue—and for the first time ever, full-year revenue also fell. Still, the company managed to edge past Wall Street’s expectations, softening the blow a bit.
The real drag came from the core automotive business. As competition heats up globally, demand has cooled. Automotive revenue dropped 11% annually to $17.7 billion, and vehicle deliveries slid 16% YoY to just over 418,227 units. For a company once defined by relentless EV growth, that slowdown stands out.
On the contrary, Tesla’s newer businesses are quietly picking up speed. The energy generation and storage segment jumped 25% YoY to $3.84 billion, while services and other revenue rose 18% annually to $3.37 billion—reminding everyone that Tesla is no longer just about cars.
Even more interesting, profitability improved. Gross margin climbed to 20.1%, the highest in two years, signaling tighter operations and better efficiency despite the auto slowdown. Under Elon Musk, the story is clearly evolving. The company is dialing down older bets, even planning to wind down Model S and X production to make room for what comes next: robotaxis, AI-driven systems, and new manufacturing lines.
CFO Vaibhav Taneja made it clear this transition won’t come cheap. After spending $8.5 billion in 2025, Tesla is gearing up for roughly $20 billion in capital expenditures, building new factories and scaling AI infrastructure, including its Optimus humanoid robot. Looking ahead, Tesla is lining up its next wave—Cybercab, Semi, and Megapack 3 are all slated for volume production in 2026, while early Optimus production lines are already taking shape.
Meanwhile, analysts tracking Tesla predict the EV company’s EPS for fiscal 2026 will grow 32.1% YoY to $1.44. Moreover, in fiscal 2027, earnings are expected to rise 35.4% annually, pushing EPS to around $1.95.
A flywheel is like a self-reinforcing loop where each step makes the next one stronger. That’s precisely how Morgan Stanley analyst Andrew Percoco sees Tesla’s robotaxi push playing out. He believes Tesla’s robotaxi push could turn into a powerful growth engine. Every autonomous mile driven sharpens the FSD system, bringing Tesla closer to fully unsupervised driving. That, in turn, could push more buyers to opt for FSD, lift vehicle demand, and strengthen cash flows over time.
Even though the rollout, starting with Austin, has been slow, the firm sees it as a deliberate move to fine-tune the model before scaling across multiple cities. There’s also a cost advantage at play, thanks to Tesla’s vertical integration; its robotaxi operations could run far cheaper than traditional ride-hailing rivals.
Still, Morgan Stanley’s analyst flags near-term pressure from rising investments and cash burn. For this vision to hold, Tesla needs steady progress in autonomy to keep momentum alive and fund its broader AI ambitions.
Analysts remain sharply divided on Tesla. The stock has a “Hold” rating overall. Of the 43 analysts covering TSLA stock, 15 recommend a “Strong Buy,” two have a “Moderate Buy,” 17 suggest a “Hold,” and the remaining nine have a “Strong Sell” rating.
The mean price target of $408.42 suggests the EV stock has a potential upside of 7.4% from the current levels. Wedbush’s Street-high of $600 implies TSLA could rise as much as 57.8% from here.
Tesla’s robotaxi story still feels like it needs time to play out. The stock’s dip might look attractive, but with a slow rollout and risks around scaling Cybercab too early, it is not an obvious buy now, especially when TSLA still trades at a rich premium. A lot of future growth is already priced in.
That said, approvals for FSD in places like the Netherlands and widespread robotaxi expansion might start building that much-talked-about flywheel and could lift sentiment. For now, it’s a story investors may want to track closely rather than chase, waiting for clearer signs that execution is catching up with ambition.
On the date of publication, Sristi Suman Jayaswal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com