Tesla Just Delivered Terrible News for Its Investors
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Tesla Just Delivered Terrible News for Its Investors
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The stock market has had its fair share of down days recently, but April 2 was not one of them — the S&P 500 ended that session essentially flat. However, shares of Tesla(NASDAQ: TSLA) plunged by more than 5% on the day after the company announced a disappointing set of electric vehicle (EV) delivery numbers for the first quarter. And then they kept falling.
Tesla is coming off two consecutive years of declining passenger EV sales, and another decline in 2026 looks possible. Many investors own its stock because they are enthusiastic about future products like the Cybercab autonomous robotaxi and the Optimus humanoid robot, but 73% of the company’s revenue still comes from selling passenger cars.
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On that note, sluggish EV sales have led to poor financial results, which could drive its stock sharply lower from here.
Image source: Tesla.
The company delivered 1.79 million EVs in 2024, which was down 1% from the prior year. The decline worsened in 2025, with deliveries sinking by 9% to 1.63 million cars. As a result, the company’s automotive revenue sank by 10% last year, with its earnings per share (EPS) plummeting 47%.
Tesla delivered 358,023 EVs during the first quarter of 2026, which was actually a 6% increase from the prior-year quarter. However, it was well below Wall Street’s consensus estimate of around 370,000 — hence the sharp decline in the stock on April 2, and in the sessions that followed. As of midday on April 7, the shares were down by more than 10% from where they closed April 1.
Management said it manufactured over 408,000 cars during the first quarter, suggesting that its inventories may have grown. That could place downward pressure on prices (and profit margins) in the current quarter.
Rising competition has been a key reason for Tesla’s sluggish sales. The company used to be the clear leader in major EV markets like Europe, but low-cost manufacturer BYD, which is based in China, is now regularly the top seller. It sold 17,954 EVs across Europe in February, edging out Tesla, which sold 17,664 cars. However, BYD’s sales were up 162% year over year, whereas Tesla’s sales grew by just 12%.
CEO Elon Musk was initially receptive to competing with low-cost manufacturers. Back in 2024, Tesla discussed launching an affordable EV dubbed the Model 2, and the company has also repeatedly cut prices on the popular Model 3 and Model Y platforms over the last couple of years. But Musk concluded that engaging in a race-to-the-bottom price war wouldn’t be fruitful in the long run, so the Model 2 was shelved, and he has since redirected the resources for that project into autonomous vehicles instead. In fact, he is now shrinking its passenger EV lineup by eliminating the premium Model S and Model X entirely.
Even if shifting resources into the development of autonomous vehicles and robots is the right long-term move, shrinking passenger EV sales will leave a huge hole in the company’s financial results in the near term.
Management plans to deploy its Cybercab robotaxi in a ride-hailing network, where it could create a high-margin revenue stream by completing autonomous trips for customers around the clock. However, cars outfitted with the company’s full self-driving (FSD) system are only approved for unsupervised use in Austin, Texas, right now, and a wider rollout will take a significant amount of time due to strict government regulations.
Therefore, even if the Cybercab enters mass production this month, as Musk expects, those vehicles won’t be generating meaningful ride-hailing revenue until its unsupervised FSD is approved for use on the roads more broadly. That means that ride-hailing probably won’t be able to pick up the slack for the company’s sluggish EV sales for at least a couple of years.
The Optimus humanoid robot faces a similar timeline. It will be manufactured in Tesla’s Fremont, California, factory, where it will take over the production capacity previously used for the Model S and Model X. However, robot production won’t ramp up until the end of 2026, so it could be a few years before those are bringing in meaningful revenue.
With that said, Optimus presents an enormous opportunity. Musk believes humanoid robots could outnumber humans by 2040 due to their versatile applications in households and businesses. He thinks Optimus could generate $10 trillion in revenue over the long term, making the robot business orders of magnitude more valuable than the EV business.
The company generated earnings of $1.08 per share in 2025, which was a 47% drop from 2024. Its stock has since declined by around 25% from its all-time high, but I would argue that did not fully reflect the sharp drop in earnings.
The stock is now trading at a price-to-earnings ratio (P/E) of 316, making it 10 times more expensive than the Nasdaq-100 technology index, which has a P/E of around 29.3. It looks heavily overvalued relative to its big-tech peers.
The stock would have to plunge 90% from here just to trade in line with the Nasdaq-100 on a P/E basis. That might sound unrealistic, but something similar actually happened in early 2023 when the broader stock market was in bear territory. Tesla stock slumped by almost 75% from its peak to a low of around $113, taking its P/E to 29.8.
Since the broader market is currently in the throes of a sell-off, I think Tesla presents real downside risks given its lofty valuation, its sluggish EV sales, and the long wait before the Cybercab and Optimus reach commercial scale.
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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends BYD Company. The Motley Fool has a disclosure policy.
