Tesla (TSLA) shares edged higher in premarket trading on Monday, tracking a broader market rally fueled by a sharp decline in oil prices and renewed risk appetite among investors. The stock, which closed at $406.43 on Friday, was quoted around $412.09 in early premarket action, according to Google Finance, representing a gain of roughly 1.4%.
The positive sentiment was driven by weekend reports that Washington and Tehran had reached a preliminary agreement to halt the Iran conflict and reopen the Strait of Hormuz. This development sent crude oil prices tumbling more than 5%, which in turn boosted U.S. equity futures as traders anticipated lower inflation pressures and rotated into growth-oriented names.
However, beneath the surface of the market rally, Tesla faces renewed regulatory headwinds. Reuters reported Monday that the company has provided its own published safety data to regulators in Sweden and the Netherlands regarding its Full Self-Driving (FSD) system. Traffic safety experts interviewed by Reuters characterized Tesla's numbers as "misleading marketing." The company did not respond to Reuters' inquiries.
The Netherlands' RDW agency, which approved FSD in April, is now pushing for broader European Union approval. In Sweden, Anders Eriksson of the transport agency told Reuters that officials "look beyond headline figures" when evaluating the technology. European approval for FSD is critical for Tesla, as the company ties European signoff to its sales targets while Chinese electric vehicle rivals continue to gain market share.
FSD approval remains the key catalyst ahead. Reuters noted that Tesla needs approval from EU countries representing 55% of member states and 65% of the population before launching FSD across Europe. This regulatory hurdle comes at a time when Tesla's valuation remains stretched, with a price-to-earnings ratio of just over 371, leaving little margin for error if earnings disappoint.
On the fundamentals side, Tesla reported first-quarter revenue of $22.39 billion and non-GAAP diluted EPS of $0.41. Free cash flow reached $1.44 billion after capital expenditures. The company noted that paid Robotaxi miles nearly doubled from the fourth quarter, with unsupervised rides going live in Dallas and Houston in April. Management maintained its 2026 timeline for volume production of the Cybercab, Tesla Semi, and Megapack 3.
However, delivery numbers remain a concern. Tesla delivered 358,023 vehicles in the first quarter against production of 408,386, indicating ongoing demand softness and potential inventory buildup. Analysts are watching for second-quarter delivery figures, with earnings expected around July 22, though Tesla has yet to confirm the date on its investor relations site.
The average 12-month analyst price target on Google Finance stands at $404.54, roughly in line with the current price. Of 30 analysts covering the stock, 12 rate it a buy, 15 are neutral, and 3 are bearish. The stock's high valuation makes it particularly vulnerable to any negative surprises, whether from regulatory pushback on FSD, weaker-than-expected deliveries, or a broader market rotation away from growth stocks.
Cheaper oil, while supportive of equities generally, could also pose a challenge for Tesla by making traditional gasoline-powered vehicles more economical to operate, potentially dampening demand for electric vehicles. Investors will be watching closely for any developments on the FSD approval front and the upcoming delivery report.
