Tesla (TSLA) , the electric vehicle giant led by Elon Musk, has long been a darling of investors seeking growth in the innovative technology and sustainable energy sectors. However, a recent sharp pullback in high-flying tech stocks has particularly hit Tesla shares. Tesla's stock price declined by approximately 50% from its peak. While this drop might alarm some investors, it presents a compelling opportunity for others. Now could be an opportune moment to consider buying Tesla shares. Tesla's stock has historically been volatile, with significant peaks and troughs driven by market sentiment, macroeconomic factors, and company-specific developments. The recent drop — while notable — has happened before: 2016, 2019, 2020, 2022, and 2024 also saw drops of about 50% or more. The company remains a leader in the EV market, which is projected to grow exponentially as governments worldwide push for carbon neutrality and consumers increasingly adopt sustainable transportation. According to industry forecasts, the global EV market could reach a valuation of over $1 trillion by 2030 and Tesla is well-positioned to capture a significant share of this growth. Of course, EVs cannot be the only reason to buy the shares. The company's enterprise value, even net of the significant decline, is ~$ $775 billion as of today's close. Therefore, the valuation is more than three-quarters of estimates for the entire industry five years from now. What you're buying To believe the shares will rise, one must also see value in other future revenue streams and innovation, and Tesla has some good ones. For example, Tesla is diversifying into energy storage (Powerwall, Megapack), solar energy (Solar Roof), and artificial intelligence (AI) with its Full Self-Driving (FSD) technology. The FSD suite, in particular, could become a game-changer, potentially generating recurring software revenue akin to a subscription model—something analysts estimate could add billions to Tesla's top line in the coming years and is critical to the rollout of the company's promised robotaxi. While promising, Tesla's expansion into high-growth markets like China and India could face considerable competition. China-based BYD (Beyond Your Dreams) offers competitive EVs at even more competitive prices. That said, Tesla's new factory openings (e.g., the continued scaling of Shanghai Gigafactory) have strengthened its global footprint. Politics risk Elon Musk's leadership is a polarizing yet undeniable factor in Tesla's appeal for many. His unconventional style and ventures (e.g., X Corp, SpaceX) and track record of turning ambitious ideas into reality is remarkable. Historically, his efforts to advance more climate-friendly technologies, his socially liberal stances, and his entrepreneurship positioned him as a likable iconoclast by broad swathes of the population. However, more recently he has recognized that the federal government is on an unsustainable fiscal path and joined the Trump administration as the head of the newly founded Department of Government Efficiency (DOGE) to root out government waste, fraud and abuse aggressively. While the need to do this has been repeated over the years by prominent politicians on both sides of the aisle, the effort has drawn out polemicists. President Trump is a polarizing figure, demonized in some quarters as is anyone who aligns themselves with him as Elon Musk has. Given his position as the CEO of a large publicly traded company whose products are everywhere and recognizable, alienating a portion of the population carries significant risks not just for Musk, but for all Tesla stakeholders including employees, shareholders and those who simply bought their cars. At best some folks who wouldn't usually concern themselves much with the political views of corporate management now refuse to buy Tesla cars merely because they don't like the CEO - one assumes they give little thought to the other stakeholders such as employees and shareholders. For example, the Teachers Insurance & Annuity Association of America owns 13.1mm shares, and has seen a > $3 billion decline in the value of their shares. The public employee pensions of California and New York are also large shareholders. At worst, it has prompted criminal behavior as those opposed to cutting government spending have vandalized Teslas, in some cases setting them on fire. In the Bay Area, where we live, posters denouncing Musk and Tesla cars hang on telephone and light poles. Tesla owners preemptively put bumper stickers on their vehicles to distance themselves from the company's CEO. We recently parked behind a Tesla with a bumper sticker that said, "I bought it before we knew Elon was crazy." Doubting that a bumper sticker would placate anyone who wanted to protect government waste and vandalize strangers' cars, we didn't put one on ours. However, my wife has told me that she's received unsolicited diatribes from strangers about Elon when they've seen her Tesla, and she has on a couple of occasions made a point to park it out of sight, which speaks to the tension this is causing. Baird analyst Ben Kallo said on Squawk on the Street " When people's cars are in jeopardy of being keyed or set on fire out there, even people who support Musk or are indifferent might think twice about buying a Tesla. " The trade I suspect the stock could remain volatile, but I also believe there are levels at which it could find a floor. Tesla deserves a meaningful premium due to its leadership position in the space, best-in-class technology, and significant lead in data, which will be hugely important as FSD becomes mainstream and as robotaxis goes from science fiction to an everyday reality. The consensus is that the company will earn ~ $3.86/share in FY 2026, representing YoY growth of about 35%, according to Bloomberg data. At a PEG ratio of 1 that works out to ~$135 share. Throw a 25% premium for the company's apex position gets us to ~$168/share as a base case valuation. An April 25th 225/195 1x2 put spread can be put on for about even money as of today's closing prices. Buying one April 225 put for $14.95 and selling two 195s against it for $7.10 each (a small net debit). This trade will essentially break even at any price above $225. If Tesla shares fall further, it will see profits of up to $30 if $TSLA falls to $195 as of April 25th expiration. Below that, profits will decline because the position holder is short two $195 puts for every $225 they own. Still, the downside risk is, effectively, that one would own the shares at $165, a more than 30% discount to the current share price and very close to the $168 valuation I previously identified while profiting from more potential pressure. Buy 1 TSLA Apr. 25 $225 put Sell 2 TSLA Apr. 25 $195 put A call/spread risk reversal, such as the 205/275/305 example below, would be a more bullish posture, and more appropriate if one believes that the backlash against Tesla owners will soon subside. In any case Tesla shares are where they were in the first week of December 2020, even though the company has tripled revenues since then. Buy 1 TSLA Apr. 25 $275 call Sell 1 TSLA Apr. 25 $310 call Sell 1 TSLA Apr. 25 $205 put 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.
