Key Takeaways
- Tesla’s stock is down 19.8% in 2025, as two quarters of declining sales and controversy generated by CEO Elon Musk have taken a toll.
- Joe Dennison of the Virtus Zevenbergen Innovative Growth Stock Fund expects Tesla stock to make a comeback next year.
- Dennison says the growing role of autonomous vehicles and AI and a focus on new, more affordable vehicles will drive Tesla stock back up.
Declining sales, coupled with controversies generated by CEO Elon Musk, have sent Tesla TSLA stock sharply lower in 2025. Still, the manager of a stock fund that has owned Tesla shares since shortly after its 2010 IPO believes a turnaround is not far off.
Joseph Dennison is a manager on the $516 million Virtus Zevenbergen Innovative Growth Stock Fund SCATX. The fund has a 7.3% allocation to Tesla, making the stock its fourth-largest holding. This is one of the largest weightings to Tesla of any diversified actively managed US stock fund.
Dennison argues that Tesla has weathered tough times and sharply negative investor sentiment. He thinks the increasing importance of autonomous vehicles and Tesla’s rollout of new, more affordable models should help fuel a 2026 revival. While Tesla stock is up from its worst levels of the year, it’s down 19.8% so far in 2025, a far cry from the 62.5% gain posted for 2024. Dennison doesn’t share the market’s downbeat view. “The future of transportation is electric and autonomous, and there’s no company better positioned to capitalize on that opportunity than Tesla,” he says.
Tesla Is ‘More Than Just a Car Company’
Dennison has been a portfolio manager for a decade on the fund, which is managed by Zevenbergen Capital Investments. It is a highly concentrated growth-stock fund that holds 35-40 stocks. Virtus Zevenbergen Innovative Growth ranks in the 27th percentile of the large-cap growth category over the past 10 years, returning an average of 15.8% a year over that period. With its concentrated growth strategy, the fund’s returns have been volatile. For example, it lost 55% in 2022, putting it in the 99th percentile of its category, before it gained 66% the following year, catapulting it into the top 1%.
The fund has held Tesla stock since shortly after the company’s IPO in 2010. Over the past decade, the stock has been one of the largest contributors to the fund’s returns, second only to Nvidia NVDA. Tesla shares’ 1,872% gain over the past decade contributed 65 percentage points to the fund’s 321% return over that period.
“We’ve always viewed Tesla as more than just a car company, but as a once-in-a-generation leader in AI, robotics, and sustainable energy,” says Dennison. Still, he doesn’t deny the company is having a rough time. Tesla’s sales declined from $19.9 billion in the second quarter of 2024 to $16.7 billion in the second quarter of 2025. This matches a broader trend, with overall US EV sales having fallen by 6.3% year-over-year in the quarter, according to a report by Cox Automotive.
Tesla stock has had its fair share of volatile years. In fact, the 19.8% decline in 2025 falls far short of other big downdrafts. For example, the stock suffered a 65% loss in 2002 through Aug. 20, and a roughly 32% decline over the same period in 2019. “We fully acknowledge there will always be short-term headwinds or turbulence from the supply, demand, and more recently sentiment standpoints,” says Dennison, but he adds that “the company continues to make the necessary investments to drive long-term shareholder returns.”
Sale Woes and Musk Controversies Hit Tesla
The primary drivers of Tesla stock’s problems in 2025 have been declining sales and concerns about the brand amid controversies sparked by Musk. But Dennision says Tesla is in a similar place to where it was in 2016, when it first launched the Model 3. That year, the stock had fallen 40% by mid-February (a similar decline to earlier this year). The company had just announced its 2015 annual financial results, which showed that losses had roughly tripled to $6.93 per share from $2.36 per share in 2014. While the stock regained ground, it still ended the year down 11%.
“You had the S and X as more mature platforms having a hard time, as there are only so many $100,000 cars you can sell in the world. So the Model 3 was pretty key, and it was having some challenges from an execution and scale standpoint,” explains Dennison. “We saw the stock flat to challenged for a year-plus.” He says Tesla turned things around as it scaled up production and was able to achieve greater profitability. Shares rose 45.7% in 2017.
Then there’s Musk’s role at the company, which has attracted copious negative publicity. Musk’s increasing focus on politics has alienated portions of Tesla’s client base. For instance, during his time as head of the Department of Government Efficiency, he oversaw abrupt mass federal government layoffs and posted false or incorrect claims about how much the agency had cut from the federal budget. His statements have also drawn criticism in parts of Europe, where sales have fallen sharply.
Dennison says Tesla has also seen similar challenges here. He points to a 2018 tweet Musk made: “Am considering taking Tesla private at $420. Funding secured.” After it became clear Tesla was not going private, the SEC sued Musk. The suit resulted in a settlement that included a fine, Musk’s resignation as chairman of the company, and a requirement that any tweets he made be reviewed if they contained material information about the company.
While the stock plunged in the wake of that controversy, it has since recovered and grown many times over. Dennison believes this incident is indicative of how Musk controversy alone isn’t enough to harm Tesla stock over the long term. “I think it’s still going to come down to the fundamental execution of the company,” he says. “The numbers and the fundamentals will be the ultimate driver of the stock’s price over a longer period.”
Turnaround Factors for Tesla
Dennison says the first factor that will help Tesla turn things around are advances made by the firm’s autonomous vehicles, including its robotaxi program. He points to the success of this program in Austin, which has been a major source of publicity for the company. Tesla has expanded the program, having just received a license to operate its robotaxis statewide.
More broadly, Dennison says that the more the auto industry moves toward autonomous vehicles, the more Tesla can leverage its competitive advantages. “We strongly view Tesla as an AI company,” he says. “The most important variables for the development of AI are access to proprietary data, the capital needed to invest in software and hardware, and engineering talent. We feel Tesla checks all those boxes.”
Dennison cites Tesla’s strong balance sheet, which had $15.6 billion in cash and equivalents as of the end of the second quarter, as well as the firm being a major destination for young engineers.
The last and potentially largest factor is the company’s data stream, since the machine learning models which power autonomous vehicles require enormous quantities of data with which to train. “Their fleet of millions of cars capturing real-world data on the road is a strong competitive advantage differentiator,” Dennison says.
He also expects the firm’s sustainable energy business to grow substantially as AI drives electricity demand. “It’s still 10%-15% of revenues, but it’s growing 50% year over year, and it’s the highest-margin segment of the business today,” he says.
Back on the automotive side of the business, Dennison says new models will help expand Tesla’s customer base. He believes the six-seater Model Y L will appeal to new customers, while the company is working to increase the affordability of its vehicles.