Quora Answer: Why, Despite Boycotts over Controversial Political Stands, Has Tesla Stock Risen 22% in the Past Year?

The following is my answer to a Quora question: “Why, despite boycotts over controversial political stands, has Tesla stock risen 22% in the past year?”

Where did you come up with this imaginary number?  Tesla’s trailing twelve-month return sits at roughly 2.84%, not 22%, as of the most recent trading data.  The stock did rally hard earlier in the window, touching an all-time closing high of US$489.88 on 16^th December 2025, before a brutal post-earnings collapse wiped much of that gain out.  Following its second-quarter 2026 results, Tesla shed roughly US$214 billion in market value in a single stretch, with the stock plunging 14% and market capitalisation briefly falling below US$1 trillion for the first time in months.  The honest headline is not why Tesla rose 22% despite controversy.  It is why Tesla rallied to an all-time high on pure narrative, and why that narrative is now visibly unwinding in real time.  That is, if anything, a more damning story than the one originally proposed.

Tesla posted record second-quarter 2026 revenue of US$28.24 billion, up 26% year-over-year, alongside a record 480,126 vehicle deliveries.  Beneath that headline, operating income fell 57% to just US$398 million, and operating margin collapsed to 1.4%, down from 4.1% a year earlier.  Adjusted earnings per share came in at US$0.33, badly missing the roughly US$0.53 Wall Street expected.  Free cash flow turned negative at US$1.1 billion, the first negative reading in two years.  Gross margin fell to 16.8% to 16.9%, down from over 20% just two quarters earlier.  Average revenue per vehicle dropped to approximately US$42,730, from US$45,345 a year prior.  Research and development spending jumped 49% to US$2.37 billion, chasing artificial intelligence, Robotaxi, and Optimus, three businesses that remain, by revenue, a rounding error against the automotive division still carrying the entire company.  Capital expenditure guidance for 2026 sits above US$25 billion, with Elon Reeve Musk telling investors on the earnings call that the company intends to spend as fast as it possibly can, a sentiment that should terrify any shareholder currently watching free cash flow run negative.

Why the Valuation Remains Absurd Even after the Crash

Even after the sell-off, Tesla traded at a market capitalisation of roughly US$1.423 trillion as of late July 2026, a figure that at its peak exceeded the combined market capitalisation of the next 37 largest automotive manufacturers on the planet, including Toyota, BYD, and General Motors.  Tesla’s price-to-earnings ratio sits at 346.  Toyota’s sits at 10.  Tesla’s profit per vehicle fell roughly 40% year-over-year to approximately US$2,140 in the first quarter of 2026, nearly identical to Toyota’s US$2,078 per unit, meaning the company’s supposed manufacturing edge has essentially evaporated on the one metric that actually measures whether a car company is good at making and selling cars.  A market pricing Tesla at 34 times Toyota’s earnings multiple, while the two companies now earn almost the same profit per vehicle sold, is not pricing Tesla’s automotive business.  It is pricing a story about robots and rockets that has not yet produced meaningful revenue.

The SpaceX Merger: Consolidation Dressed as Synergy

Musk came the closest he has ever come to confirming a Tesla-SpaceX merger on the Q2 2026 earnings call, telling analyst Colin Rusch of Oppenheimer that overlap between the two companies keeps growing, particularly around the Terafab chip project, while stopping short of formal confirmation and deferring to Tesla’s general counsel.  Nevada corporate filings from January 2026 registered two merger subsidiary entities, X-A Merger Sub and X-S Merger Sub, listing SpaceX CFO Bret Johnsen as an officer, the standard legal scaffolding for a stock-for-stock combination.  This deserves scepticism rather than excitement.  Musk holds 42% equity in SpaceX but 85% of its voting power, an entrenchment structure private companies can maintain far more easily than public ones facing shareholder scrutiny.  SpaceX itself posted a net loss of roughly US$4.9 billion in 2025 on revenue of US$18.7 billion, and had priced its own planned IPO at a valuation of US$1.77 trillion, roughly 95 times trailing revenue, a multiple no company in market history has sustained the growth rate required to justify over a decade.  Folding a loss-making, opaquely governed private company into a public one already trading at an inflated multiple lets those SpaceX losses, and that governance structure, migrate onto Tesla’s balance sheet and into Tesla’s shareholder base, diluting existing public holders while Musk’s combined voting control likely strengthens rather than weakens.  Tesla’s own Q1 2026 filing already discloses a US$2 billion equity stake in SpaceX, appreciated to roughly US$3 billion.  That is not synergy.  That is the private company’s risk quietly finding its way onto the public company’s books, ahead of a formal vote shareholders have not yet been given the chance to properly scrutinise.

Why Sentiment, Not Fundamentals, Drove the Rally in the First Place

The mechanism behind the earlier rally to US$489.88 was never a secret.  Tesla’s China sales fell 9% in the first half of 2026, with domestic automakers now holding roughly 72% of the Chinese EV market, and yet the stock climbed regardless, carried by Robotaxi headlines, Optimus demonstrations, and merger speculation rather than by any of the operating metrics actually deteriorating in plain sight.  Investors were not pricing the 1.4% operating margin.  They were pricing a narrative about a future Musk kept promising and kept delaying, the exact pattern Electrek’s own coverage flagged as the reason repeating the same commitments on the Q2 call accelerated the subsequent sell-off once the numbers arrived and failed to match the story.  A market that rewards repetition of a promise over delivery of a result is not functioning as a pricing mechanism.  It is functioning as a fan club with a stock ticker attached, and fan clubs, eventually, run into a quarterly earnings report that does not care how enthusiastic the membership is.

There was no 22% rally built on resilience in the face of controversy.  There was a speculative run to an all-time high, built on merger rumours and unfulfilled robotics promises, that has since partially collapsed under the weight of a 1.4% operating margin, negative free cash flow, and a per-vehicle profit now converging with a conventional Japanese automaker trading at a fraction of the multiple.  The proposed SpaceX merger does not fix any of this.  It imports a loss-making, unaccountably governed private company’s balance sheet into the public one, at the exact moment public shareholders have just watched US$214 billion evaporate in a single stretch.  If this is resilience, the word has stopped meaning anything.

---

Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code