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tesla (TSLA) has had a dismal start to 2024, losing more than a third of its value. But Tesla shares have not gotten significantly cheaper, according to one key indicator.
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Often, when a stock sells off sharply, Wall Street investors and analysts tout it as a buy, citing much cheaper valuations.
Tesla shares are down 34.2% this year, the worst performance of the S&P 500. The stock is 60.5% below its all-time high from late 2021. But Tesla has largely followed the decline of earnings estimates amid weaker-than-expected deliveries despite continued price cuts.
Tesla stock valuation
| Date | tesla stock price | EPS Estimate for 2024 | PE 2024 Ratio | EPS Estimate for 2025 | PE 2025 Ratio |
|---|---|---|---|---|---|
| December 30, 2022 | 123.18 | $7.07 | 17.4 | $7.93 | 15.5 |
| March 31, 2023 | 207.46 | $5.62 | 36.9 | $6.95 | 29.8 |
| September 29, 2023 | 250.22 | $4.68 | 53.5 | $6.21 | 40.3 |
| October 31, 2023 | 200.84 | $3.93 | 51.1 | $5.54 | 36.2 |
| November 30, 2023 | 240.08 | $3.85 | 62.3 | $5.40 | 44.5 |
| December 29, 2023 | 248.48 | $3.79 | 65.5 | $5.27 | 47.2 |
| January 31, 2024 | 187.29 | $3.14 | 59.7 | $4.38 | 42.8 |
| February 29, 2024 | 201.88 | $3.10 | 65.2 | $4.25 | 47.5 |
| March 15, 2024 | 163.57 | $2.97 | 55 | $4.06 | 40.2 |
| 2.62* | 62.4 | ||||
| *Sharp consensus on the latest analyst forecasts. |
Source: data set
Analysts have lowered their 2024 earnings per share targets to $2.97 per share, according to FactSet, down from $3.79 at the end of 2023, $5.62 per share at the end of March 2023 and a whopping $7.07 at the end of 2022.
So the forward P/E ratio for Tesla stock is 55.0 as of March 15. That’s down from 65.2 on Feb. 29 and 65.5 at the end of last year, but above where it was on Sept. 30. That’s well above the 2024 PE Ratio of 36.9 as of March 31, let alone the 17.4 PE ratio at the end of 2022.
Additionally, several analysts have cut Tesla earnings estimates over the past week. FactSet’s “clear consensus” on the latest estimates is that 2024 earnings per share will be $2.62. At that level, Tesla’s 2024 PE ratio is 62.4, in the upper half of its range in recent months.
The same trend holds for 2025. Analysts have lowered Tesla’s 2025 earnings per share estimates to $4.06 from $5.27 at the end of last year. (Notably, that’s now below Tesla’s peak earnings of $4.07 per share in 2022.)
Analysts were expecting $6.95 on March 31, 2023 and $7.93 at the end of 2022. Tesla’s PE ratio in 2025 is now 40.2. That’s down from 47.5 on Feb. 29 and 47.2 on Dec. 29. But it is approximately the same as the September 29 reading of 40.3. It is substantially higher than the 2025 PE ratio of 29.8 at the end of March 2023 and 15.5 at the end of 2022.
While FactSet doesn’t offer a “clear consensus” on 2025 earnings, recent analyst cuts suggest next year’s EPS estimates will drop further.
Sharp or not, Tesla’s valuation is well above that of other profitable automakers. ToyotaEngine (M.T.) has a forward PE ratio of 9. General Motors (G.M.) has a Forward PE ratio of 4. Among EV players, rapid growth Auto Li (L.I.) has a forward PE ratio of 17. Electric vehicle giant BYD (BYDDF), has a forward PE ratio of 14.
ferrari (CAREER) is the only one close to Tesla, with a Forward PE of 50.
Investor’s Business Daily typically doesn’t focus on price-earnings ratios because many leading stocks have high valuations as investors bet on strong growth to justify them. During its long history, Tesla was a growing company with high PE ratios. But it’s not a growing company right now.
Bullish Case for Tesla Stock
Of course, increasingly, Tesla’s bull case is looking beyond 2025, with hopes for a next-generation small electric vehicle or even looking beyond EVs. Some analysts, most famously Morgan Stanley’s Adam Jonas, attribute most of their Tesla stock price targets outside of electric vehicles and into big bets like autonomous driving, robotics and artificial intelligence.
Clearly, much or even most of Tesla’s current market valuation is a bet that some of those moonshots will pay off in the future, generating massive profits.
Whether they give results or not is an open question.
But Tesla stock still isn’t cheap.
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