<div id="readability-page-1">Tesla (TSLA -1.39%) is without doubt one of the best-performing stocks. In the past 10 years, it has soared over 2,000% (as of Aug. 28), which would have turned a $1,000 investment into about $21,000 today. But this year has been different, with shares down 14% in 2025. This comes at a time when the broader market has put up a double-digit gain. Tesla trades 29% below its peak, prompting some investors to take a closer look at the industry disruptor to decide if it belongs in their portfolio. Let's consider the bull and bear cases for this top electric vehicle (EV) stock before coming to an informed conclusion. <div><img src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MzEyODcvdGVzbGEtY2FyLWF0LXN1cGVyLWNoYXJnZXItc3RhdGlvbi5wbmcmdz03MDA?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="700" height="420" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MzEyODcvdGVzbGEtY2FyLWF0LXN1cGVyLWNoYXJnZXItc3RhdGlvbi5wbmcmdz03MDA"/>Image source: Tesla. </div> <h2>Low margins to high margins </h2> The ongoing artificial intelligence (AI) boom is on every investor's mind. Tesla could be considered a top AI play, given that it leverages the technology for its full self-driving capabilities. CEO Elon Musk has some high hopes for what the future could bring. This is exemplified in the company's robotaxi ambitions. Tesla launched the service earlier this summer in Austin, Texas, with these rides having a human supervisor on board. The cars also operate within a limited geofenced area. But the business has plans to test and enter new markets. If these efforts prove successful from technical, regulatory, and user-adoption points of view, and Tesla is able to bring an unsupervised robotaxi service to cities across the world, the economics of the company could drastically improve. It would basically run an Uber-like platform with its own cars, but without drivers. In other words, the company would go from selling one-time, generally low-margin EVs to a recurring high-margin revenue stream. Besides the autonomous-driving technology and robotaxi fleet, Tesla's humanoid robot, called Optimus, also adds fuel to the bullish argument. Musk previously said that the business will be able to produce 1 million units annually by the end of the decade. In addition to working in Tesla factories, Optimus robots could be sold to other businesses and even consumers to handle certain tasks. Musk believes this could be a $10 trillion revenue opportunity. <h2>Paying up for a struggling automaker</h2> The bear case is supported by Tesla's sky-high valuation. You must be comfortable paying a price-to-earnings ratio of 198 to purchase the stock today. The market appears to have unshakable confidence that a global robotaxi fleet will be introduced within a reasonable time frame and that the financial implications will be a boon for Tesla. It seems Tesla shares are always trading at an extremely expensive valuation. While the business is no doubt working on exciting projects that could end up being a net benefit to society, investors have to accept that this will probably always be a story stock. The publicity Tesla and Elon Musk receive means that narratives might drive movements in the share price more than underlying fundamentals do. This makes it very difficult to gauge what the &#34;right&#34; valuation should be. Nonetheless, based on the current state of the business, it's easy to argue that the stock is overpriced. Tesla's sales have been under pressure due to macro headwinds and intense competition. Automotive revenue, which totaled $19.9 billion in the second quarter of 2024, fell 16% to $16.7 billion in the second quarter of this year. The company's EV fleet doesn't possess the pricing power that it once did. Maybe consumers don't think these products are so special anymore, and they could be losing their wow factor. As a result, profits are also taking a hit, showcasing Tesla's capital-intensive nature. Tesla is one of the world's most forward-thinking companies. However, I believe investors are better off avoiding the stock, since the bear case holds more weight. </div>

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Tesla's stock has seen a significant rise over the past decade, increasing over 2,000%, but has dropped 14% in 2025. Investors are weighing the potential of Tesla's AI-driven initiatives, including robotaxis and humanoid robots, against its high valuation and declining automotive revenue. While the bullish case highlights future revenue opportunities, the bearish perspective emphasizes the stock's overpriced nature and challenges in maintaining sales and profit margins. Ultimately, the analysis suggests that investors may be better off avoiding Tesla stock at this time.

- Tesla has experienced significant growth over the past decade, with shares increasing over 2,000%, but has seen a 14% decline in 2025 amidst a rising market.  
- The company is exploring new revenue streams through its robotaxi service and humanoid robot, Optimus, which could enhance its profitability if successful.  
- However, concerns about Tesla's high valuation, declining automotive revenue, and increased competition suggest that the stock may be overpriced, leading to a cautious outlook for potential investors.

Is Tesla Stock a Buy Now?