With Elon Musk stepping away from his Department of Government Efficiency (DOGE) leadership role and back into the driver’s seat at Tesla (TSLA), there’s no shortage of storylines to follow about the electric vehicle (EV) market leader and its controversial co-founder and CEO.
A quick search will yield headlines about Tesla’s recent second quarter results, the long-promised “affordable” model (which turns out is just a bare-bones Model Y), robotaxi timelines and the opening of the first retro-futuristic Tesla Diner & Drive-In in Hollywood.
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However, the big story is what investors should expect in the future from a company that now firmly has a foot in both the car manufacturing and artificial intelligence (AI) and robotics camps. Tesla supporters are hyped about Musk’s return, the company’s robotaxi ambitions and its growth expectations, but many analysts are skeptical of the exact same things.
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Tesla’s ‘Insane’ Stock Multiple
Guesting with Brian Sozzi on Yahoo Finance’s Opening Bid recently, Washington Crossing Advisors’ senior portfolio manager Chad Morganlander raised questions about Tesla’s sky-high stock price and robotaxi future after its recent, largely performative launch event in Austin.
“There’s a lot of jazz hands going on here [with Tesla’s robotaxi launch],” Morganlander said. “This stock trades at ten times revenue. You have a [stock] multiple that’s insane.” Morganlander said he favors Tesla’s self-driving taxi rival Waymo, which Alphabet has been developing since 2009.
Tesla stock currently has a trailing price-to-earnings (P/E) multiple of around 185 and a forward P/E near 164, per Yahoo Finance. To put this into perspective, the forward P/E ratio for the S&P 500 sits just under 23.
Until it makes significant strides in the robotaxi game, Tesla will likely be seen as overvalued. And given the company’s history of bold promises followed by inevitable delays, investors are becoming anxious.
“Look, insane multiples are nothing new with Tesla,” said Edward Corona, veteran trader and the brains behind The Options Oracle newsletter. “It’s always traded more like a story stock than a traditional automaker.”
However, that likely can’t last forever. “That said, at some point, the story has to catch up to reality — and I think that’s the tension here,” Corona told GOBankingRates. “The valuation is rich, no doubt, and without real progress on the robotaxi front or a pickup in earnings growth, it’s tough to keep justifying these levels.”
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Is It Time To Sell Your Tesla Stock?
Tesla recently reported weaker-than-expected second quarter earnings and shares dipped 8% following the announcement on July 23. With Tesla’s near future committed to ride-sharing services and self-driving technology, investors likely shouldn’t expect deliveries growth in 2025 but should count on competition to increase. Decreases in government support to EV makers had Musk suggesting a “few rough quarters” lie ahead.
And then there’s Musk himself, who has been a lightning rod over the past year for his backing of President Donald Trump, his detachment from Tesla during his stint leading the DOGE initiative, and his more recent public split from Trump and his administration, among a seemingly endless list of other things.
“Elon hasn’t exactly helped his own cause lately,” Corona said. “Between the distractions, lawsuits and erratic public comments, he’s added a layer of headline risk that investors can’t ignore.”
Still, if you’re an investor who’s held on this long, uncertainty is something that comes with being a Tesla booster. Current Tesla stockholders should consider holding or possibly tweaking their shares, according to TipRanks and Zacks, respectively. Corona is in agreement.
“If I were holding Tesla right now, I wouldn’t hit the sell button blindly — but I’d definitely be trimming into strength and locking in some gains,” he said. “No harm in taking something off the table when things start feeling a little overheated.”
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This article originally appeared on GOBankingRates.com: One Stock Strategist Says Tesla’s Stock Valuation Is ‘Insane’ — Is It Time To Sell?
