Tesla shares climbed after the company topped Wall Street's third-quarter delivery estimate, but the stock now trades at a price-to-earnings ratio nearly ten times that of the Nasdaq-100. Falling profits, Chinese competition, and Elon Musk's pivot away from premium EVs leave the rally on shaky ground.
Tesla shares rose 2.2% to $378.73, up $8.14 on the day, after the company reported stronger-than-expected deliveries for the quarter ended September 30.
Deliveries beat estimates, but the trend is mixed
Tesla delivered 486,532 vehicles in the third quarter, topping Wall Street's average estimate of 461,974. However, that figure was still a 2% decline from the same quarter last year. The company had delivered 838,149 EVs in the first half of 2026, a 16% increase from the year-ago period.
Price cuts across the lineup helped drive the recovery, but they have also squeezed margins. Rising oil prices, driven by the ongoing war between the U.S. and Iran, have also pushed some consumers toward EVs, benefiting the broader industry rather than Tesla specifically.
Competition and a valuation problem
Tesla has lost market share to lower-cost Chinese brands including BYD, Geely, and Zeekr, which undercut Tesla on price while offering comparable features. Premium European brands BMW and Mercedes-Benz have also launched competing EVs this year. Rather than compete directly, Musk pulled the Model S and Model X from the market earlier this year, repurposing those production lines for the Optimus humanoid robot.
Tesla's earnings have fallen sharply as a result. The company generated $1.08 per share over the last four quarters ended June 30, down 75% in two years. That leaves the stock trading at a price-to-earnings ratio of 343, compared with 35.2 for the Nasdaq-100. Tesla will report complete third-quarter results on October 21.
Cybercab and Optimus still carry execution risk
Investors betting on Tesla often point to the Cybercab robotaxi and the Optimus robot as the real long-term opportunity. Musk has said Optimus could generate $10 trillion in revenue over the long term and predicts humanoid robots will outnumber humans by 2040. But the Cybercab can't scale until Tesla's unsupervised full self-driving software wins regulatory approval across several U.S. states. It is already behind Alphabet's Waymo, which completes over 500,000 paid autonomous rides weekly across 15 American cities.
Optimus faces its own hurdles too: Tesla is still refining the robot's hands and has no existing supply chain to draw on, forcing it to build most components in-house.
Source: The Motley Fool
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