Why Tesla Retail Buyers Hold ‘Timeless Religion’ When Automobile Gross sales and Inventory Sink

Shares of Tesla Inc. (TSLA) have lengthy confounded Elon Musk’s critics: whereas gross sales have collapsed in some key markets, retail traders stay remarkably dedicated to the agency.

For instance, after information broke that Tesla’s European gross sales had plummeted 40% year-over-year in January 2025, at the same time as the broader electrical automobile (EV) market grew 26%, retail traders poured $7.3 billion into Tesla inventory over the following 12 days, probably the most of any “shopping for streak” over a decade, in line with JPMorgan’s “Retail Radar.”

The report advised this was more cash chasing after unhealthy: Noting that Tesla’s retail traders have been down 7% within the 12 months up to now versus 3.3% for the broader S&P 500 index, JPMorgan analysts identified, “Many of the drawdown got here…as they elevated their holdings.”

What provides? “Core traders” have an “timeless religion in and love of Elon Musk,” Steve Sosnick, chief strategist at Interactive Brokers, informed Investopedia. “In truth, I’ve regularly referred to it as a ‘faith-based’ inventory.” However, he added, “that religion is well-earned after making many long-term traders fairly wealthy.”

It is Not About Tesla’s Previous or Current, However Its Future

“Tesla’s electrical automobile enterprise is beneath strain from pricing challenges and fierce competitors, with 2024 marking its first-ever annual supply decline,” John Clean, chief fairness strategist at Zacks Funding Analysis, informed Investopedia. “Musk’s divided consideration and rising political controversies have traders questioning whether or not Tesla continues to be his prime precedence.”

Nonetheless, it is Tesla’s long-term prospects that rely most. “Musk needs the corporate to be primarily considered by means of the lens of AI and robotics slightly than solely as an automotive firm,” Clean stated.

Among the many CEOs of automakers, “solely Musk is perceived as an avatar of the long run,” Sosnick stated.

Therefore, traders’ “religion is predicated much less on company fundamentals than futurism—robotaxis, and so on.—which is why the inventory’s valuation is manner above that of a standard auto firm,” Sosnick stated. “Thus, in the event you’ve already determined that the inventory is all concerning the future, you possibly can overlook some pesky particulars concerning the current.”

That is borne out in interviews. “To be sincere, I am not an enormous fan of Tesla’s EVs,” a retail investor who snapped up extra shares of TSLA as its value fell in March 2025 informed Enterprise Insider. “My bullish outlook is extra on the AI and autonomous facet of the enterprise.”

Tesla’s Subsequent Chapter

As a substitute of the same old “dumb cash” derision one would possibly anticipate, analysts we spoke to do not assume these traders are irrationally following market sentiment.

For a number of years, Tesla has been making a strategic pivot past its core automotive enterprise. “Tesla’s long-term progress prospects nonetheless stay robust, pushed by its thriving vitality technology and storage phase, expansive supercharger community, and AI developments,” Clean stated. The corporate is sitting on an enormous money pile to assist make that occur—about $37 billion at year-end 2024.

“Just about all” of Tesla’s market cap is predicated upon future expectations, and that has at all times been the case, Sosnick stated, noting that Common Motors Firm (GM), Ford Motor Co. (F), and different automakers all have single-digit price-to-earnings ratios, which implies traders are valuing them primarily based virtually wholly on the place they’re now, not the place they’re prone to be sooner or later.

For core traders, the numbers are compelling: Whereas automotive operations nonetheless accounted for 78.9% of Tesla’s complete gross sales in 2024, its Power Technology/Storage phase confirmed exceptional progress, with revenues rocketing 113% 12 months over 12 months within the fourth quarter and its vitality storage deployment reaching 11 gigawatt-hours, Clean famous. As well as, “the charging enterprise has the potential to evolve into a considerable income stream for the corporate,” he stated, particularly as main automakers are compelled to undertake Tesla’s charging normal.

Nonetheless, main challenges stay. Gross sales of the Cybertruck, launched in 2024, sputtered and the autos have been recalled for vital issues. As well as, most traders surveyed assume Musk’s political actions have broken the corporate—they’ve sparked mass protests and acts of vandalism in opposition to the EVs and dealerships worldwide. In the meantime, Common Motors, Ford, rising gamers like Rivian Automotive, Inc. (RIVN) and Lucid Group, Inc. (LCID), and Chinese language rivals like BYD are gaining floor quick as Tesla’s abroad gross sales drop precipitously.

The Backside Line

The query is whether or not Tesla’s bold growth into vitality, AI, and autonomous driving can offset the numerous challenges in its automotive enterprise. Given the headwinds the corporate faces, the execution of this transformation turns into all of the extra essential if the religion of retail traders is to be justified.