Here's Why I'm Still Not Buying Tesla Stock, Despite It Falling 9% This Year
Key Points
Tesla expects the rollout of its autonomous ride-sharing service will make significant progress in 2026.
The company plans to start production of a humanoid robot later this year.
To support its growth initiatives, Tesla expects a more than doubling of its capital expenditures in 2026.
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With electric-car maker Tesla (NASDAQ: TSLA) launching its Robotaxi ride-sharing service in 2025 and with management expecting to begin production of its Optimus humanoid robot this year, it's a great time to buy shares of the growth stock, right? After all, hasn't the stock's 9% year-to-date pullback created a timely buying opportunity?
Not necessarily.
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While Tesla's ambitious plans for the future are admirable, that doesn't automatically make the stock a buy. Underneath the surface, the company is facing some issues that investors should be aware of. Not only did Tesla's vehicle sales struggle in 2025, but profits are moving in the wrong direction. Even more, profits could remain underwhelming in 2026 as the company ramps up spending on growth initiatives.
As investors weigh Tesla's mix of bold plans with its near-term challenges, I'd encourage investors to give heavy weight to these near-term challenges and risks. Why? The stock's valuation demands it.
Tesla's unreleased Cybercab, which is purpose-built for autonomous driving. Image source: Tesla.
Big ambitions
You don't have to look far for evidence of Tesla's big ambitions.
The company's bold growth initiative that has been in the spotlight the most recently is its autonomous ride-sharing service, called Robotaxi. Powered by its own vehicles, Tesla believes that once the service is in full swing, its owners will be able to check their vehicles in and out of the Robotaxi fleet's inventory, similar to how homeowners can list their homes on home-sharing platforms like Airbnb.
Tesla executives are so ambitious about this service's potential success over time that they encouraged investors during the company's most recent earnings call to start considering its addressable market in the context of a company moving toward "transportation as a service," rather than one that just sells vehicles.
With a large portion of its existing vehicle fleet expected to become Robotaxi-capable once its software is ready and sent to its vehicles via an over-the-air update, Tesla expects its Robotaxi service to scale quickly.
"We expect to have fully autonomous vehicles in probably somewhere between a quarter and half of the United States by the end of the year, pending regulatory approval," explained Tesla CEO Elon Musk in the company's fourth-quarter earnings call.
And regarding its Optimus humanoid robot, Musk believes the technology will be so impactful that it will "move the needle on U.S. GDP significantly" over the long term.
Big costs
One problem for investors, however, is that these bold aspirations will be costly.
"As we increase vehicle autonomy and begin to produce Optimus robots at scale, we are making very big investments," Musk explained in Tesla's fourth-quarter earnings call.
More specifically, the company expects its capital expenditures to more than double year over year, rising to a figure "in excess of $20 billion," explained Tesla chief financial officer Vaibhav Taneja during the call.
Adding to the company's near-term pain and risks, this huge growth in spending comes at a time when vehicle sales are struggling and profits are moving in the wrong direction. Tesla's 2025 vehicle deliveries fell 9% year over year to about 1.6 million units, and full-year net income declined 46% year over year to $3.8 billion.
A backdrop featuring challenges like this would be acceptable in the near term, if not for the stock's extremely high valuation. As of this writing, Tesla stock has a price-to-earnings ratio of about 368 and a market capitalization of more than $1.5 trillion. This means that investors have arguably already priced in a rebound in vehicle sales trends and a return to strong profit growth, even before these outcomes have started. In fact, I'd venture to say a good portion of Robotaxi's potential success has already been priced into the stock at this level.
With this said, I don't think shares are trading at a low enough price to make them a buy today. Of course, I could be wrong, and Tesla's growth roadmap could come faster and be more profitable than I expect. But given the stock's current valuation, I just think the risks are too high.
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Daniel Sparks and/or his clients have positions in Tesla. The Motley Fool has positions in and recommends Airbnb and Tesla. The Motley Fool has a disclosure policy.
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