Tesla Inc. (NASDAQ: TSLA) is the worst performer among the Magnificent Seven this year, yet it remains one of the group’s most expensive stocks. As of Sept. 29, shares were down 22% year to date, while the company’s market capitalization stood near $1.4 trillion and its price-to-earnings ratio hovered around 327. The divergence runs deeper than a single valuation snapshot: revenue is still growing, profit margins are contracting, and investors keep paying more for each dollar of earnings even as the share price falls.
The stock’s slide this year stands in sharp contrast to its long-term record — Tesla shares are still up 2,460% over the past decade, a wildly successful stretch for buy-and-hold investors.
The more recent tension is between growth and profitability. For the first six months of 2026, ended June 30, revenue rose 21% year over year, with automotive sales up 24%. Operating margin, however, contracted to 1.4% in the latest quarter from 4.1% in the second quarter of 2025, while research and development spending jumped 49% and selling, general, and administrative costs climbed 45%.
The valuation premium is equally visible against peers. Tesla trades at roughly 327 times earnings, compared with just 11 times for Ford Motor Co. (NYSE: F). On a sales basis, Tesla fetches about 13 times revenue, versus roughly 3.2 times for Rivian Automotive (NASDAQ: RIVN) and under 1 times for Lucid Group (NASDAQ: LCID). By any measure, the stock carries a clear premium to its comparable groups.
For much of 2024, Tesla traded between 40 and 70 times earnings, when profit margins averaged around 12% and topped 15% in some quarters. As margins eroded through 2025, the valuation did not follow suit — investors instead raised the price they were willing to pay per dollar of earnings, keeping the stock steadier than the profit decline would suggest.
The causes of the margin squeeze include the loss of federal subsidies, rising spending on areas such as artificial intelligence, intensifying competition, and price cuts. The analysis suggests the premium stems less from past success than from a belief that the margin slump will not last.
That belief is underpinned by growth expectations. Apply a 15% margin to Tesla’s trailing revenue at today’s multiple, and the stock would trade near $1,500 a share — a sign the market is pricing a return to historical profitability.
The strongest bull case centers on robotaxis. ARK Invest CEO Cathie Wood has estimated the global robotaxi market could reach $8 trillion to $10 trillion, and Tesla’s deep vertical integration allows it to produce Cybercabs at exceptionally low cost relative to competitors, potentially capturing significant share.
Robotaxi rides are also likely to carry higher margins than vehicle sales — Uber Technologies (NYSE: UBER), for reference, generates profit margins of about 17%. In the end, Tesla’s premium rests on twin expectations: sales growth and margin recovery are both on the horizon, and robotaxi exposure alone could deliver on both.
