This could make or break Tesla stock this year

Tesla (TSLA 0.58%) is a polarizing stock. When investors are bullish, the stock can soar, but when concerns arise about its financials or growth prospects, it can end up in free fall. This year has been particularly volatile for Tesla, and it is down more than 40% in 2024. It has rebounded, but its year-to-date loss is still about 20%.

Whether Tesla ends the year successfully may hinge on one key event that will likely prove to be even more important than its next earnings report.

The long awaited robotaxi event

Tesla will unveil its robotaxi this year, which could be a game-changer for the ride-hailing industry. More importantly for the stock itself, the event will also show how close Tesla is to achieving full autonomous driving, something that has long been a big question mark. The company is even facing lawsuits over its claims of autonomous driving, with many owners feeling Tesla misled them into thinking fully autonomous capabilities would be available soon.

While Tesla vehicles have some autonomous driving capabilities, the driver still needs to be present and paying attention to the road. The vehicles are not completely autonomous. If the company can show it’s making progress on a fully autonomous robotaxi, it will go a long way toward winning over investors and proving its doubters wrong. The event was scheduled for August but was pushed to October because of a design change.

Weak earnings data could get worse

Tesla needs the robotaxi event to serve as a positive catalyst, because unfortunately, the business simply hasn’t been doing very well. Last month, Tesla reported second-quarter results in which revenue rose just 2% year over year to $25.5 billion. And as operating expenses rose and margins fell, its net income nearly halved, falling 45% in the quarter.

Competition from Chinese electric vehicle makers is growing, and as other companies work on autonomous vehicles, Tesla is under pressure to show both consumers and investors that its vehicles are worth more. If it can’t prove that its autonomous driving technology has improved significantly, that could lead to even more pressure on its margins.

Even though Tesla stock has fallen this year, it’s still trading at more than 80 times estimated earnings. That’s not the kind of premium many growth investors would be happy to pay for a company struggling to grow revenue. With a market cap of nearly $640 billion, Tesla stock is likely to fall further this year (and beyond) if it doesn’t show significant progress in its earnings report or during its October presentation.

Is it worth buying Tesla stock today?

Given the uncertainty ahead, the company’s worsening electric vehicle market, and CEO Elon Musk’s tendency to set his expectations too high, I’m cautious about the stock at this point.

Weak economic conditions could put even more pressure on the business. Given how much Tesla has to prove over the rest of 2024, the most prudent option for investors is to wait and see.