Tesla Lags Mag-7 YTD: Why is it Crashing & What Should Investors Do?

Electric vehicle (EV) maker and tech titan Tesla TSLA has been off to a rough start this year. After a wild ride that saw the stock surge over 50% following Trump’s election win to hit record highs in December, the momentum has faded fast. It seems like the hype around Musk-Trump ties have cooled and investors are taking a hard look at Tesla’s fundamentals, which don’t look too great now.TSLA is on a five-day losing streak and closed at $328.50 yesterday—its lowest level since Nov. 15. It’s also the worst-performing Mag-7 stock so far this year, trailing NVIDIA, Apple, Alphabet, Microsoft, Amazon and Meta Platforms.TSLA's YTD Price Performance Vs. Mag-7 Peers Image Source: Zacks Investment ResearchTesla revolutionized the EV market, much like Amazon transformed retail and Netflix reshaped entertainment. For over a decade, TSLA has been synonymous with cutting-edge innovation and industry dominance. But lately, the magic seems to be wearing off.Well, much of Tesla’s growth could be linked to its visionary CEO Elon Musk. Once seen as Tesla’s biggest asset, he is now a concern for investors. His polarizing statements, political controversies and divided attention are shaking confidence. Meanwhile, Tesla’s dominant market share is slipping fast in the face of intensifying competition. And investors are taking notice of it.Musk insists Tesla is entering its next phase of explosive growth, even claiming it could one day be worth more than the next five biggest companies combined. But with the stock tumbling and rivals catching up, investors are starting to wonder whether Tesla’s growth story is running out of juice.TSLA’s Declining Sales & Shrinking Market ShareTesla’s sales slump is turning into a major concern. After its first-ever annual delivery decline in 2024, 2025 isn’t looking much better. Sales are falling across key markets, with Europe and China leading the downturn.In January, Tesla’s sales plummeted 63% in France and 8% in the UK. Registrations in Germany plunged 59%, even as overall EV sales in Germany jumped 54%. That means companies like Volkswagen VWAGY and BMW are grabbing Tesla’s lost market share. Adding fuel to the fire, Elon Musk’s controversial support for Germany’s far-right AfD party has stirred backlash, possibly turning away customers in the region.Tesla’s sales in China aren’t faring much better. The country is full of home-grown players like BYD Co Ltd BYDDY, NIO, XPeng and Li, among others. As China is a big market for Tesla, stiff competition is likely to erode its share in the country. The company’s sales dropped 11.5% in January, while rival BYDDY surged 48%. The competition is only heating up. BYD just unveiled a major expansion of its AI-powered "God’s Eye" self-driving system, integrating DeepSeek technology even into its sub-$10,000 EVs. Meanwhile, Tesla faces regulatory roadblocks delaying its own Full Self-Driving (FSD) rollout in China. Its FSD program is yet to be launched in China and Europe.Back home also, Tesla’s dominance is fading. The company’s sales in California took a sharp hit last year, with numbers declining in all four quarters of 2024.TSLA’s U.S. EV market share has dropped below 50%, down from 63% in 2022, as legacy automakers like General Motors GM and Ford F ramp up their EV push, alongside rising threats from Rivian and Lucid.With intensifying global competition and market share slipping across regions, Tesla’s growth narrative is under serious pressure.Musk’s Divided Attention Adding to TSLA’s WoesMusk’s growing list of responsibilities is making investors uneasy. In addition to running Tesla, he’s juggling leadership at SpaceX, Neuralink, X (formerly Twitter) and AI startup xAI. Now, his controversial government role under Trump (as part of the Department of Government Efficiency) adds another layer of distraction.Concerns over Musk’s focus intensified this week after he made a roughly $100 billion bid to take over OpenAI, which was swiftly rejected. In response, OpenAI CEO Sam Altman countered with an offer to buy X for $9.74 billion. Musk, being Musk, didn’t take it well. He lashed out, calling Altman a "swindler" on social media.With his attention split and political controversies piling up, investors are questioning whether Tesla is still his top priority.2025 is a “Prove it” Year for TeslaWith TSLA’s EV sales declining and affordability a growing concern, let’s hope the company sticks to its timeline to launch affordable cars. Tesla is on track to launch one in the first half of 2025 and expand its lineup from there. If executed well, this could reignite Tesla’s demand in price-sensitive markets and it could recapture lost market share.At the same time, Musk is betting big on FSD and robotaxis, calling them Tesla’s most valuable future segment. Tesla plans to roll out unsupervised FSD as a paid service in Austin this June, with potential expansion to California and other U.S. regions by year-end, pending regulatory approvals.Tesla Shares Still Too PriceyEven after its rough run on the bourses so far in 2025, Tesla is the most overvalued stock among its Mag-7 peers. It is trading at a forward 12-month P/E of 124.48X — nearly four times the group’s average forward P/E. With slowing EV growth and execution risks, many investors worry that Tesla’s valuation is way too premium.TSLA P/E F12M Too StretchedImage Source: Zacks Investment ResearchHow to Play TSLA NowTesla’s core EV business is struggling, and while it expects modest growth in 2025, Musk has walked back his 20-30% vehicle growth target. The company also faces trade policy risks. Trump’s 25% tariffs on steel and aluminum could raise vehicle costs, hurting affordability or squeezing margins. If tariffs on Mexico and Canada are enacted, supply chain disruptions could add further pressure. Estimates for TSLA’s EPS have also been revised downward in the past 30 days.Image Source: Zacks Investment ResearchWhat’s working great for Tesla is its energy generation and storage business, with deployments doubling in 2024 to 31.4 GWh. Musk expects another 50% growth in 2025, making it a key revenue driver.Currently, Tesla is at a crossroads, and this year will be pivotal for its future. The company needs to prove it can execute its autonomous driving vision and deliver on its affordable EV promise. Investors will closely watch Tesla’s autonomous vehicle (AV) progress, as FSD approvals and robotaxi developments will be key to Tesla’s long-term growth.While long-term potential remains, near-term challenges make it a risky bet. For existing investors, it’s worth holding on, as this is not an ideal exit point, while new buyers may want to wait until Tesla proves it can deliver on its AV and affordable EV promises.Tesla currently carries Zacks Rank #3 (Hold) and has a VGM Score of D. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Ford Motor Company (F): Free Stock Analysis Report General Motors Company (GM): Free Stock Analysis Report Tesla, Inc. (TSLA): Free Stock Analysis Report Volkswagen AG Unsponsored ADR (VWAGY): Free Stock Analysis Report Byd Co., Ltd. (BYDDY): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks