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Tesla: Some Analysts Are Calling for A 30% Drop—Time to Panic?
Written by Sam Quirke. Published 10/18/2025.
Key Points
- Next week’s earnings report could decide whether Tesla’s rally continues into year-end, or collapses.
- Several analysts now see as much as 30% downside from current levels.
- However, bullish voices argue the stock’s long-term AI and robotics story remains intact.
Tesla Inc. (NASDAQ: TSLA) has again become the focus of a fierce market debate. After rallying nearly 100% since April, the stock has stalled below recent highs and is trading around $430. With third-quarter earnings due next week, investors are asking whether this consolidation is healthy or a warning sign. Some analysts are openly calling for a sharp correction, while others say the long-term story remains intact.
Either way, pressure is rising. With a price-to-earnings (P/E) ratio near 250, Tesla's valuation leaves very little room for disappointment. As the stock struggles to extend its breakout and macro concerns about a bubble in tech stocks spread, this earnings report could define how the rest of the year plays out. Should investors be worried? Let's take a closer look.
The Bear Case Is Getting Louder
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The latest calls for caution came from teams at Industrial Alliance Securities and Evercore ISI, both of which issued updates with a fresh price target of $300 for Tesla shares. A recent close around $430 implies roughly 30% downside based on some bearish targets—a bold call with earnings imminent. There's a growing view that the stock's valuation may be stretched, and Tesla faces mounting pressure to defend market share as competition intensifies.
Tesla's margins have been under pressure for several quarters as price cuts persist across the lineup. Although the company delivered a strong Q3 sales report, investors were quick to fade the move, suggesting expectations are already high. Many also question whether robotaxi and full self‑driving promises will meaningfully boost profits anytime soon.
Some investors see the recent consolidation as eerily similar to past peaks. Disappointing Q1 results ended a prior rally of similar magnitude, and the concern is that sentiment has become stretched again—meaning even a good quarter might not be enough to satisfy the market.
Why the Bulls Aren't Backing Down
Despite the renewed pessimism, many bulls remain confident. This week Melius Research reiterated its Buy rating and set a $520 price target, implying about 20% upside. Royal Bank of Canada also maintained its bullish view, citing Tesla's long‑term growth potential in AI and robotics, particularly the Optimus humanoid project.
The bullish case is simple: Tesla is more than an automaker — it's a platform company that integrates energy, software, and artificial intelligence. Its global delivery scale, strong brand, and vertical integration provide advantages that many rivals find hard to replicate.
Bulls also note that during prior pullbacks, Tesla has typically found support from long‑term holders who view volatility as a buying opportunity.
The Real Risk Is Expectations, Not Execution
The central question for investors isn't just whether Tesla is executing; it's whether perfection is already priced in. A P/E ratio of roughly 250 implies investors expect exceptionally high earnings growth for years — a demanding outlook for a cyclical, capital‑intensive industry.
After the recent surge, even a modest disappointment — slower margin improvement or cautious forward guidance — could trigger rapid selling.
The fact the stock hasn't made new highs in weeks suggests traders are reluctant to chase. In a year when optimism has pushed valuations across tech higher, Tesla looks particularly exposed.
What to Watch in Next Week's Report
Next week, investors will focus on several items: whether automotive gross margins have stabilized after multiple quarters of decline; any tangible progress or revenue visibility for robotaxi and Optimus initiatives; and regional trends, especially in Europe and China where competition is intensifying.
If earnings confirm that Tesla's core business remains strong and new growth levers are progressing, the bullish narrative could regain control. But disappointing margins or soft guidance would make $300 targets from Evercore and Industrial Alliance look more plausible.
Investors shouldn't panic, but they should temper expectations. Tesla remains resilient, with exceptional brand power and depth of innovation. Still, the stock's valuation and recent trading behavior suggest that much of the easy upside may already be priced in.
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