Tesla (TSLA) continues to face a challenging phase of its business as margin pressure, intensifying global EV competition and unclear visibility on higher-margin software contributions continue to cloud the long-term earnings trajectory. While the company remains a dominant EV brand, deliveries are expected to decline this year, pricing power has eroded, and profitability has compressed despite record revenue. Competition from Chinese manufacturers — both domestically and abroad — continues to narrow Tesla’s differentiation, while regulatory uncertainty and slowing global EV adoption add further strain. Meanwhile, autonomy and FSD monetization remain long dated, making it increasingly difficult for investors to justify a premium valuation during a period of decelerating demand and rising execution risk. Trade timing & outlook After rallying towards its 52- week high, TSLA has formed a double top at $470 and momentum has stalled. TSLA recently broke below its 50D SMA and retesting it as resistance, coupled with underperformance relative to the S & P 500. With poor relative performance and a potential shift in trend, our downside target is $330, providing a strong risk to reward for adding bearish exposure. Fundamentals Tesla’s valuation remains significantly elevated relative to automotive peers despite weakening margins and slowing revenue growth: Forward PE ratio: 206.12x vs. industry average 10.65x Expected EPS Growth: 30.50% vs. industry average 9.70% Expected revenue growth: 9.17% vs. industry average 3.57% Net margins: 5.31% vs. industry average 2.92% Bearish thesis Margin compression despite revenue growth: Q3’25 results showed ~12% revenue growth but a ~40% decline in operating income, with pricing cuts and rising costs limiting the path back to mid-teens margins. Demand softness into 2025: Street projections call for full-year deliveries to decline despite Q3’s strength, as tax-credit timing pull forward demand. Competitive pressure mounting: BYD, Xiaomi, NIO—are reshaping the global EV landscape with lower-cost models, faster refresh cycles that erodes Tesla’s competitiveness across regions. Uncertain autonomy monetization: FSD licensing interest from other automakers remains limited, and regulatory frameworks restrict full-feature deployment. International expansion risk: New markets such as India require careful pricing to reach economic parity; missteps could result in underwhelming volume growth or prolonged operating losses. Options trade With an IV Rank of 4%, options remain inexpensive for buying downside exposure using puts. I’m buying the Jan 16, 2026 $425/$370 Put Vertical @ $17.48 debit. This entails: Buying the Jan 16, 2026 $425 Put @ $24.68 Selling the Jan 16, 2026 $370 Put @ $7.20 The maximum reward is $3,752 per contract if TSLA closes below $370 at expiration. The maximum risk is $1,748, per contract if TSLA closes above $425 at expiration. The breakeven point for this trade is $407.52. View this Trade with Updated Prices at OptionsPlay This options structure provides defined-risk bearish exposure that aligns with weakening margins, and a competitive landscape that continues to pressure Tesla’s premium valuation. With the stock failing to regain an important technical level and business headwinds mounting, the setup supports a bearish thesis with a strong potential risk to reward. DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
