Tesla (TSLA) reported that its electric vehicle (EV) sales jumped in the second quarter, as the firm is likely benefiting from higher demand for EVs amid higher gasoline prices. And in a sign that the automaker expects the latter trend to continue for some time, Elon Musk's company reportedly plans to increase production at its German auto plants.
Still, with Tesla's self-driving technology and robotaxi initiatives underwhelming in many respects and the shares still changing hands at an extremely high valuation, TSLA stock looks very expensive. Further, given its poor execution in these areas, there's a sizeable risk that its newer initiatives, on which it's expected to spend large amounts of money, will not produce favorable results. In light of these points, the shares do not look appealing.
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Q2 Delivery Surge and a Sign That the Ramp Will Continue
Last quarter, Tesla's deliveries surged 25% versus the same period a year earlier to over 480,000. The company delivered more EVs than in any previous second quarter in its history. And TSLA is reportedly looking to boost production at its plant in Grünheide, Germany, by roughly 20%.
www.barchart.com Execution Issues Abound
In April 2025, Musk stated that Tesla's robotaxis would be available to 50% of America's population by the end of 2025. But its robotaxis are still only available to consumers in just six cities, and in two of those municipalities—Dallas and Houston—only “five to ten active vehicles” are reportedly in service. And in Orlando and Tampa, where the service was recently launched, the robotaxis will only be accessible in relatively tiny areas.
Further, as of last November, Tesla's own data indicated that the safety record of its Full-Self Driving (FSD) system was not very much better than Teslas driven with “active safety features” employed. According to a Forbes columnist, the data indicates that “FSD is doing well, but that it’s not close to being ready for unsupervised release, since FSD+Human is only doing modestly better than a human alone on city streets.” And in January, Elektrek, an EV and green tech news website, reported that “Tesla’s autonomous vehicles (were) crashing at a rate much higher than human drivers,” even though at the time, the vehicles all had human safety monitors in them.
Finally, federal regulators are investigating nine crashes involving the use of FSD in poor visibility and probing whether the automaker exaggerated FSD's capabilities. If the regulators find that FSD has significant problems and/or that TSLA meaningfully exaggerated its capabilities, the resulting negative publicity could lower Tesla's revenue considerably and cause TSLA stock to sink.
The automaker is now spending a great deal of money on other AI projects. But given the tech giant's poor execution in the self-driving space, it's difficult to be confident about these other initiatives.
Valuation and the Bottom Line on TSLA Stock
TSLA stock has a forward price-earnings ratio of 284. In light of the company's execution issues and expectations that its cash flow was negative in Q2, that's an excessive price to pay for this name.
On the date of publication, Larry Ramer 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. For more information please view the Barchart Disclosure Policy here.
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