Tesla (NASDAQ: TSLA) stock has dramatically underperformed recently. Since rising to near $500 in late 2025, it has fallen around 30%.

So, what’s going on here? And has the recent share price weakness created an opportunity?

A perfect storm of risks

Taking a look under the bonnet, there are actually multiple factors behind the recent drop in the stock. It seems Tesla has been hit by a perfect storm of risks this year.

For a start, operational performance has been poor. In the first quarter of 2026, for example, the company produced 50,000 more vehicles than it delivered (408,000 versus 358,000) – the widest gap in at least four years.

This suggests that demand for its EVs is weakening (intensifying competition, an ageing product line-up, reduced incentives, and political polarisation are some factors here). And demand could come under more pressure if high oil prices hit the economy – in a recession car sales tend to plummet as consumers hold off on large purchases.

Speaking of oil prices, if these remain high, they could also hit Tesla’s profit margins. Not only could the company find itself paying more for energy, but it could also see a rise in component costs (tyres, seats, dashboards, etc).

Another threat to profit margins is the company’s plan to develop a smaller, lower-cost EV. A smaller car may help it fend off competition from the likes of BYD and Volkswagen, but it’s likely to come at a cost in terms of profitability levels.

Market forces are hurting Tesla

Looking beyond operational performance, there are also several market forces impacting Tesla stock at the moment. Generally speaking, 2026 hasn’t been a great year for growth stocks so far.

This is especially true of growth stocks with high valuations and Tesla has a price-to-earnings (P/E) ratio of about 175. Investors just don’t have the appetite for these types of stocks right now.

Finally, one other issue that can’t be ignored is a potential SpaceX IPO. SpaceX is Tesla CEO Elon Musk’s space company.

I imagine that some investors are pulling their money out of Tesla in preparation for this IPO in the hope of making Tesla-like long-term gains. Note that Musk plans to open up this IPO to US retail investors in a big way.

An opportunity?

Is there an investment opportunity to consider here? I’m not convinced there is… yet.

In my view, the stock is still too expensive. Considering the level of competition Tesla is facing – not only in EVs but also in self-driving vehicles and humanoid robotics – a P/E ratio of 175 doesn’t make much sense to me.

It seems analysts at JP Morgan share my view. Right now they have an Underweight rating on the stock and a price target of $145 (about 60% below the current share price)

Now, I don’t know if Tesla will hit that price – it’s possibly a little too bearish given the company’s long-term potential in areas such as self-driving, robotics, and AI. But I do think there’s the possibility of further share price weakness in the near term, so I’m steering clear of this one for now and focusing on other opportunities in the market.