After sharply pushed on Thursday and Friday, Tesla(NASDAQ: TSLA) is back in focus for the next earnings report, scheduled for October 22. With a combination of record quarterly deliveries, a sharp sell-off, and an earnings report on the horizon, it’s a good time to take a close look at growth stocks. Is the pullback a buying opportunity?
The Maker (EV) Maker (EV), which also sells batteries and energy storage systems and is increasingly leaning into software and services with its full self-driving (guided) driver-assistance technology and autonomous robotaxi ride-sharing operation, has some massive catalysts ahead. But it may first weather a tough fourth quarter, raising the question of whether shares are a tough one. The stock’s high valuation makes the decision even more difficult.
With this background in mind, here are four reasons why investors might want to buy the stock and one key reason why they might want to avoid it.
Image source: Getty images.
Tesla delivered approximately 497,100 vehicles in the third quarter, a new quarterly record and, importantly, a return to growth of approximately 7% compared to the same period last year. That reversal follows two straight quarters of decline: first quarter 2025 deliveries fell 13% year over year to 336,681 and second quarter 2025 deliveries fell 13% to 384,122. Together, these figures frame Q3 not only as a huge sequential jump, but also as a clear pause in a heavy 2025 trend.
While the rebound was helped by the expiration of a key $7,500 US electric vehicle credit, it’s worth noting that third-quarter deliveries were well above analysts’ consensus forecast for only about 448,000 vehicles.
Beyond vehicles, Tesla’s fast-growing energy storage business took another major step forward in Q3. Tesla deployed 12.5 Gigawatt hours (GWH) of storage in the third quarter, the highest on record and well above both the 9.6 GWh reported in the second quarter of 2025 and the 6.9 GWH deployed in the third quarter of 2024.
This important segment now generates substantial gross profit for the company and will likely continue to grow as a percentage of total revenue.
The $7,500 federal electric vehicle credit expired on September 30 – a change that likely pulled some US demand into Q3 and could weigh on Q4. But there are two offsets worth looking at. First, Tesla’s dramatic post-COVID-19 price cuts have made its lineup much more accessible than it was a few years ago.
Second, the recently overhauled Model Y, which Tesla calls Juniper, gives the company a timely hero product to market the holidays. While these may not be enough to fully offset the loss of EV incentive, they are important catalysts that could help the company start building momentum in 2026.
More importantly, the company will soon have a more affordable model. Indeed, Tesla said in its second-quarter update that it produced its first units of the new model in June, with volume production planned before the year ends. While comments from Tesla CEO Elon Musk in the company’s earnings call suggest this could simply be a cheaper version of the new Model Y, it’s still worth getting excited about. A cheaper car can help offset the loss of the now-expired federal credit.
If the company releases a meaningful lower-priced model with compelling range and features, the addition next year could significantly expand Tesla’s addressable market.
And don’t forget what is likely Tesla’s biggest catalyst: a recently launched limited Robotaxi pilot program in Austin. It’s early days for the autonomous ride-sharing program, and a cautious rollout and regulatory restrictions mean the financial impact is likely small in the short term, but could turn into a big profit stream for Tesla over time.
As service scales and more owners opt for full self-driving (under supervision), software and services can grow as a share of revenue. This will likely be positive for margins and valuation over time. Additionally, growing buzz about Robotaxi and Tesla’s full self-driving (guided) software could help attract new Tesla buyers, accelerating sales growth.
Even after the sell-off, the stock is trading at more than 250 times earnings as of this writing. A price-to-earnings ratio (P/E) like this makes the S&P 500‘s P/E of around 26 looks cheap – and it leaves almost no room for error. The valuation arguably already praises substantial advances in autonomy, software evaluation and cheaper vehicles, while also expecting energy to continue compounding. Ultimately, stocks could take a beating if Tesla drops the ball in any way.
Despite the company’s powerful catalysts, the bear box (valuation) is simpler and tough enough for now to matter. Given all these bullish reasons to buy shares in the context of the stock’s high valuation, investors should be cautious. For investors convinced by Tesla’s long-term roadmap, a small position may make sense with the expectation of volatility and the discipline to add only if shares retreat further. Everyone would rather wait for a potential further decline in the share price or for fundamentals to catch up.
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Daniel Sparks and/or his clients have positions in Tesla. The Motley Fool holds positions in and recommends Tesla. The Motley Fool has a disclosure policy.
4 Reasons to Buy Tesla Stock and 1 Reason Not to was originally published by the Motley Fool
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