Tesla Stock Could Soar in the Second Half of 2026. Here's Why

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Tesla Stock Could Soar in the Second Half of 2026. Here's Why.

trade ideas :: 7hrs ago :: source - motley fool

By Prosper Junior Bakiny

Tesla (NASDAQ: TSLA) has not performed well this year. The stock is down 1% as of writing, while the S&P 500 has climbed 10%. Although Tesla's first-quarter results released on April 22 were pretty good on the surface -- revenue jumped 16% year over year to $22.4 billion, even amid the electric vehicle (EV) industry losing ground in the U.S. -- investors are concerned about Tesla's runaway spending. The company now projects capex spending for 2026 to be over $25 billion, above its previous guidance of $20 billion.

There is skepticism regarding whether Tesla can justify these investments, especially given that the stock trades at 208x forward earnings, a multiple that assumes near-perfect execution. But what if Tesla does show that the spending is warranted? The company might do so by year-end, and if it does, its share price could soar. Here's what investors should know.

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Will Optimus Gen 3 impress?

Tesla commands such high valuation multiples because it is looking to tap into potentially transformative opportunities that could drive substantial long-term growth. The company's work with humanoid robots is an example. Tesla is currently working on the third generation of its robot, Optimus. CEO Musk now expects the reveal of this version to be closer to the start of manufacturing, toward the end of July or August. Musk described Optimus as a general-purpose robot that can learn how to perform a task by observing a demonstration, watching a video, or listening to instructions.

If it is nearly as capable as the company expects -- and can be manufactured relatively cheaply at scale -- there could be a huge market for Optimus 3. Some corporations would likely replace part of their workforce with these robots, an option that might be more cost-effective. It could also eventually make its way into the home once it becomes affordable enough. The shift would not happen overnight. It could take years, perhaps over a decade. But all of this remains hypothetical for now. Once we see Optimus Gen 3 in action with our own eyes, though, that might cement Tesla's ability to actualize its ambitious goals, potentially sending the stock price soaring. That's why investors should pay close attention to updates regarding Optimus 3.

Progress elsewhere could jolt the stock

At least two other developments could be critical for Tesla through the end of the year. First, the company's robotaxi service is making some headway. Tesla recently expanded it to new cities, notably Dallas and Houston. This service doesn't generate much revenue and likely won't by year-end. But further progress and launches in new territories could be instrumental in helping Tesla carve out a niche in this market, which could grow rapidly in the next decade or so.

It will be important for investors to monitor that too. Then, there is Tesla's Full Self-Driving (FSD) software for consumer cars, which is currently at level 2, meaning that although it can drive itself to some extent, drivers must remain attentive and be ready to take over. Tesla is currently working on an unsupervised FSD software, which Musk thinks could be ready for consumer vehicles by the fourth quarter. If Tesla can pull that off, the stock could soar as it would lead to increased demand for its vehicles.

Should you buy Tesla stock?

There is no question that Tesla has significant upside potential, provided the company can execute and achieve its goals. However, investors should be extremely cautious and know exactly what they are getting themselves into before purchasing its shares. Tesla has been highly volatile for years. That won't change. The company faces substantial risk, even beyond legal and regulatory considerations that affect its entire business, from its FSD software, robotaxi service, and humanoid robot ambitions. Tesla's controversial CEO is another important factor to consider.

Musk is known for providing optimistic projections for the business, including timelines and product capabilities. That raises questions about whether Tesla can achieve its goals. Further, Musk is a busy man who heads another major corporation, SpaceX, which is about to have a highly anticipated IPO. That might eventually divert attention away from his work at Tesla. Amid all that, the company's valuation remains a stumbling block. The bottom line is that only investors comfortable with significant risk and volatility should consider initiating a position in Tesla. Other investors had better look elsewhere.

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Prosper Junior Bakiny 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.

This article was originally published by The Motley Fool