Tesla TSLA shares fell more than 5% yesterday after U.S. safety regulators opened a special investigation into a fatal crash involving a Model 3 in Texas. The driver claims Tesla’s partially automated driving system was engaged when the vehicle veered out of its lane and crashed into a home, killing a 76-year-old woman. CEO Elon Musk has disputed the implication that Full Self-Driving (FSD) was at fault, noting that the system is designed to operate cautiously on neighborhood streets and describing the incident as a high-speed crash.
The latest probe arrives at a sensitive time for Tesla. Musk has spent the past year repositioning TSLA’s investment story around autonomous driving, robotaxis and FSD. Tesla is now not being valued just as an automaker, but as a future leader in autonomous mobility. As a result, an accident linked to driver-assistance systems has the potential to raise fresh questions about the company's long-term vision.
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The investigation is in its early stages, and regulators have not reached any conclusion. Yet the market's reaction suggests growing concerns about Tesla's autonomous-driving ambitions. The bigger question is whether investors are focusing too much on a single incident while overlooking improving delivery trends, continued strength in the energy business, and steady progress toward broader FSD adoption. While Tesla stock is definitely not an obvious buy today, isn’t selling the stock also a bit premature now?
The Overlooked Strength of Tesla's Energy Business
While the latest safety investigation grabbed headlines, investors may have overlooked a significant positive development for Tesla's energy business. The company signed a multiyear agreement with NatPower to deploy 25 GWh of battery storage projects across Italy and the U.K. The first phase is expected to carry a construction value of $4 billion to $5 billion, with Tesla supplying its Megapack battery systems, engineering services and Autobidder software platform. NatPower ultimately aims to expand the partnership beyond 100 GWh of storage capacity, creating a potential revenue opportunity exceeding $15 billion over the next two decades.
Tesla's energy segment has emerged as one of the company's most resilient businesses. Tesla deployed a record 46.7 GWh of energy storage in 2025, up 50% year over year, and expects deployments to increase again in 2026. To support rising demand, the company is expanding production capacity through a new Megapack factory near Houston and plans to launch its next-generation Megapack 3 system later this year.
The business is also highly profitable. Tesla's energy division generated a gross margin of 39.5% in the last quarter, making it the company's highest-margin segment. While competition and policy risks remain, the energy business continues to provide Tesla with a valuable growth engine.
Overseas Strength Brightens TSLA’s Q2 Delivery Outlook
The company's delivery outlook is improving. Demand trends have strengthened across several key international markets. In China, Tesla's retail sales rose 22.5% year over year in May, ending a two-month decline. Europe was even more encouraging, with France reporting its best May on record and registrations soaring more than 655%. Strong gains were also seen in Norway, Spain, Denmark, Portugal and Sweden. Despite softer U.S. demand, robust international performance is helping offset the weakness.
Reflecting this trend, the Zacks Consensus Estimate for Tesla's second-quarter deliveries is pegged at roughly 397,500 vehicles, up both sequentially and year over year.
TSLA’s FSD Expansion Continues
Musk expects unsupervised FSD to be “widespread” in the United States by 2026-end. Apart from the United States, Tesla's FSD (Supervised) ambitions are gaining momentum in Europe. The Netherlands became the first European country to grant provisional approval for FSD in April, followed by Lithuania and Estonia. More recently, Denmark and Belgium also cleared the technology, bringing the total number of approving EU countries to five.
Tesla is now pursuing broader EU-wide approval. While some hurdles remain—most notably concerns from Sweden regarding speed-limit compliance—regulatory momentum is clearly moving in Tesla's favor. Finland could also approve the system before an EU-wide decision is expected later this year, further expanding Tesla's footprint.
Tesla also launched FSD in China last month. It comes at a time when competition in autonomous driving technology is heating up rapidly with XPeng XPEV, BYD Co Ltd BYDDY and Geely Automobile GELHY aggressively investing in next-generation smart-driving systems.
Why Long-Term TSLA Investors Should Stay Put
Tesla is clearly not a buy. The company faces real challenges, including shifting robotaxi timelines, uncertainty around Optimus commercialization and management's warning that free cash flow could turn negative as it ramps up spending on AI and autonomous-driving initiatives.
The stock has declined 15% year to date. And its valuation still leaves little room for error.
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The bears are getting louder, but the market may be underestimating Tesla's strengths. The energy business continues to grow rapidly, delivery trends are showing signs of improvement, and FSD is gaining regulatory traction in key markets. Most importantly, Tesla still possesses a powerful brand, industry-leading technology capabilities, and multiple long-term growth platforms.
With Wall Street expecting revenue and earnings growth to resume in 2026 and 2027, existing investors should retain the stock. The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
