Should You Buy Tesla Stock With $1,000 and Hold for 20 Years?

Despite how volatile it has been along the way, it's impossible to deny Tesla's (NASDAQ: TSLA) long-term share price performance. Over the past decade, the stock has rocketed 1,790% higher. A $1,000 investment made in May 2015 would be worth $18,910 today.

Thanks to its success in the auto industry, Tesla has become one of the most valuable businesses in the world. But the electric vehicle (EV) stock is now 38% below its peak -- a tumble that might have some investors wondering whether this is an opportunity to buy the dip.

Should you allocate $1,000 to Tesla shares today and hold them for the next 20 years?

Image Source: Getty Images.

A bumpy road

Tesla deserves a ton of credit for getting to this point. An intense focus on technology, innovation, software, and manufacturing prowess led to rapid growth, with the business disrupting the auto industry and becoming a powerful global brand. Tesla essentially launched the EV market as we know it today, which certainly propelled the stock price over the years.

However, the situation has changed dramatically. The company's days of monster growth and improving profitability are a thing of the past. Tesla is now a struggling automaker.

During the first three months of 2025, its vehicle sales declined 20% year over year to $14 billion. Part of the blame for that slide goes to reduced production as its factories retooled to deliver the updated 2025 Model Y. But lower selling prices due to competitive forces also had an impact, a headwind that wasn't new last quarter. The company's operating income tanked by 66% in Q1.

It's clear that Tesla can't bank on being the only EV player in town. Competition is fierce, putting more power into the hands of consumers. What's more, higher interest rates point to the cyclicality Tesla faces, as demand will be pressured when buying a new car becomes less affordable for customers.

All of this leads to the conclusion that investors should not expect Tesla in the future to deliver the type of incredible growth it did in the past. For what it's worth, analysts' consensus estimates are that its revenue will increase at a compound annual rate of 13.4% between 2024 and 2027, which is a much lower growth rate than its clip over the past 10 years.

Bullish on the vision

Only investors who are extremely bullish on Musk's vision for what Tesla could become one day -- as opposed to what it is today -- should consider buying the stock right now. Perhaps in 20 years, the investment could work out, with the hope that the business is generating massive amounts of revenue and free cash flow. Tesla's strongest supporters believe this will happen.

That outlook is based on the premise that Tesla will make good on its promise of introducing a more robust autonomous vehicle technology to the masses. The first step in that process will happen next month, when it will launch its robotaxi service in Austin, Texas. Musk intends to bring the service to more U.S. cities by the end of the year.

But how Tesla will fare in its attempt to launch a worldwide robotaxi fleet is impossible to predict. Every market has different regulations that need to be addressed. Of course, there remain significant technical hurdles on the route to fully self-driving vehicles. And maybe the most challenging hurdle will be to convince the average consumer to trust a vehicle that has no driver.

Tesla's current valuation indicates that investors view this outcome as likely. It trades at a price-to-earnings ratio of 164. That's a ridiculous price to pay for a company that is in the midst of taking a financial hit -- unless you're highly optimistic about its longer-term prospects.

There are few businesses trying to push the envelope and make a positive impact on society like Tesla is. But there is a lot of uncertainty about how it might fare from here.

So, I take the skeptical view. Based on what the company looks like today and the stock's lofty valuation, I think it would be best to avoid investing in Tesla.

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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.