EV giant Tesla (NASDAQ:TSLA) has, somewhat surprisingly, undershot the broader market in 2025, delivering a trailing 12-month return of 12.9 percent compared to the S&P 500’s 15.0 percent. Though TSLA’s return is still respectable, it’s far below what other members of the Magnificent Seven have been able to deliver in a year defined by rapid tech stock gains. Will Tesla stock go up in 2026, or will the automaker keep lagging its peers?
What Do Tesla’s Growth Catalysts Look Like?
Going into 2026, Tesla has a few key tailwinds behind it. Among these is the Fed’s ongoing reduction of interest rates. Lower rates both help to support the share prices of high-growth businesses like Tesla and encourage car sales by making financing more affordable for consumers. Although the Fed has been cautious in lowering its baseline rates, further rate cuts in 2026 will likely support both Tesla’s stock and its business.
Tesla is also likely to be the prime beneficiary of EVs finally catching on in a major way in the United States. In the first nine months of 2025, an estimated 1.2 million light-duty EVs have been sold domestically, with EVs making up 12 percent of new car sales in Q3. Although other automakers are catching up and capitalizing on this trend, Tesla remains the dominant US electric vehicle manufacturer with a market share of over 40 percent.
Over the coming 3-5 years, analysts are expecting per-share earnings growth to achieve a compounded growth rate of 32.5 percent. Though this may be on the optimistic side, it does show the high level of confidence that Wall Street still has in Tesla’s long-term growth story.
What Do Analyst Price Forecasts Predict?
Although there could be some decently strong growth trends supporting Tesla next year, analysts remain skeptical of its already high valuation. Despite being one of the largest businesses in the world, Tesla stock is still priced at the extremely high multiples of 293.7 times trailing 12-month earnings, 16.2 times sales and 226.5 times cash flow.
Even without massive gains over the last year, TSLA is still trading at $439.58. While the range of analyst price targets for Tesla is fairly wide, the consensus target of $393.29 would see TSLA lose about 10.5 percent of its current value. At the moment, it appears that Tesla’s sky-high valuation could work against it going into 2026, especially if the market revises its thinking on the tech stocks that have powered most of its gains in the last few years. This concern over valuation is also reflected in Tesla’s ratings, as more analysts are currently rating the stock as a hold than as a buy.
Tesla Worries Grow?
In addition to an extremely high valuation, there are other risks that could drag on Tesla in 2026. First among these is its ongoing loss of international market share, particularly in Europe. Tesla’s share of the European market has fallen to just 1.6 percent, down from 2.4 percent a year ago. Tesla is also losing ground in the Chinese market, where pressure from domestic EV giant BYD has pushed it into fifth place with a market share of just 5.5 percent.
Revenue and earnings growth at Tesla have also slowed, introducing fundamental questions about the expansion that will be required to justify its share prices. Though revenue did rise by 11.6 percent in Q3, that growth followed two quarters of revenue contraction. Q3’s results also missed analyst expectations, with operating profit down 40 percent compared to the year-ago period.
Tesla is also grappling with the ending of the EV tax credit, a drag that is likely to continue for the foreseeable future. Sales of Tesla’s vehicles were previously supported by a $7,500 credit, making them more appealing to consumers and encouraging sales. In the absence of that credit, EV sales could face long-term downward pressure, though it’s worth noting that this negative effect is industry-wide and not unique to Tesla.
Tesla is also planning to substantially increase its CapEx next year, much of which could end up going to projects with questionable payoffs. Specifically, Tesla is expected to ramp up spending on both its Optimus robot production and its autonomous Cybercab project. While bulls see these projects as key to the business’s future, the Optimus robots have so far failed to impress the market with their capabilities, while the Cybercab could get hung up for years due to not meeting current automotive regulatory standards. As such, Tesla could end up deploying large sums of cash now chasing returns that appear both distant and uncertain.
Finally, market sentiment could put downward pressure on TSLA. With its growing focus on autonomous driving and robotics, Tesla is now priced as an AI business. While that has certainly benefited it over the last few years, worries about an AI bubble appear to be building. Huge amounts of capital have moved into technologies that remain limited and, in some sense, quite speculative. In the event of an AI bubble bursting, Tesla would likely be treated like an AI stock on the way down, just as it was on the way up.
Will Tesla Stock Go Up In 2026?
Although Tesla does seem to have some decent growth catalysts behind it, the risks facing the business at the moment are also significant. Pressure on both domestic and international sales from other automakers could slow Tesla’s core EV business expansion, and the tech projects it is banking on to deliver outsized growth still look rather speculative. Tesla is also still dealing with the removal of the EV tax credit that has, up to now, heavily subsidized the purchase of its vehicles at the consumer level.
When these factors are combined with a sky-high share price, Tesla starts to look as though it could be set up for a tough 2026. While share prices may not plummet unless the market begins punishing high-priced stocks more generally, Tesla could have a hard time driving its prices much higher from their current position. As such, Tesla may not be the best of the Magnificent Seven to buy going into 2026.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.