Here is my take before the details. I think Tesla (TSLA) stock still belongs in a long-term investor's portfolio, but only for those who can stomach an elevated price-to-earnings multiple.
The China sales pop and the worldwide rollout of its driving software strengthen the bull case. Yet TSLA stock trades at a punishing valuation. So, I view Tesla as a name to accumulate on weakness.
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www.barchart.com I have tracked Tesla's slow shift from a carmaker to a software-and-robotics story for years. May's numbers out of China are the kind of data point that keeps the story breathing.
China Sales Surge Signals a Recovery Across the EV Market
According to a CNBC report, sales of Tesla cars built in China rose 40% in May. Preliminary data from the China Passenger Car Association (CPCA) suggests that Tesla delivered 85,982 new energy vehicles (NEVs) from its Shanghai plant, a 39.4% rise from May 2025.
CNBC also noted Chinese automakers sold 1.36 million passenger EVs in May, up 12% from a year earlier and 11% above April. Notably, BYD (BYDDY) snapped an eight-month slide with 376,990 deliveries, basically flat. Leapmotor and Geely's (GELHY) Zeekr both jumped more than 80%, while Nio (NIO) rose 62.3% and Xiaomi (XIACY) topped 30,000 deliveries. Li Auto (LI) fell 18.4%, and XPeng (XPEV) slipped 4.1%.The Global FSD Rollout Matters for TSLA Stock
The sales jump landed just as Tesla pushed its software into the world's biggest car market.
Tesla said its Full Self-Driving (FSD) Supervised system is now available in China, CNBC reported, days after CEO Elon Musk joined a U.S. delegation at a Trump-Xi summit.
The report also noted that FSD already operates in markets such as the United States, Canada, Mexico, and South Korea. However, Beijing News reported that a group of 10 Chinese owners is suing Tesla, alleging that the company claimed FSD was available before full regulatory approval was granted.
Once broader approvals are in place, FSD could become a key growth engine. Further, Morgan Stanley estimates that partly to fully automated vehicles could be a $200 billion market by 2030 and $400 billion by 2035.
On the first-quarter 2026 earnings call, Musk said he expects unsupervised FSD to be running in roughly a dozen states by year's end. He cautioned that robotaxi revenue will not be material this year but could matter in a big way in 2027. Tesla also told investors that paid robotaxi miles nearly doubled in the quarter.
Tesla Stock Trades at a High Valuation Multiple
Analysts tracking TSLA stock forecast adjusted earnings per share to expand from $1.66 in 2025 to $10.88, indicating a compounded annual growth rate of 46%.
In May 2026, the stock traded at 169x forward (2027) earnings, which is quite steep. However, TSLA stock has returned 28% over the past year, driven by excitement around autonomy and AI.
Out of the 42 analysts covering Tesla stock, 15 recommend “Strong Buy,” two recommend “Moderate Buy,” 19 recommend “Hold,” and six recommend “Strong Sell.” The average TSLA stock price target is $401.77, below the current price of about $420.
Tesla now guides to capital spending above $25 billion in 2026, which could push free cash flow into negative territory later this year. First-quarter revenue rose 16% to $22.39 billion, and the company ended the period with $44.74 billion in cash.
I think the China rebound and the FSD expansion validate the thesis that Tesla is becoming a software and autonomy company, not just an EV maker. But the rich valuation multiple means timing matters.
www.barchart.com On the date of publication, Aditya Raghunath 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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