Tesla(TSLA -9.18%) has probably been the biggest success story on the stock market in the last few years. Even after a pullback this year, the stock is up 1,500% over the past three years, rewarding investors who held through a volatile period with 16x gains.
Tesla's status as one of the biggest battleground stocks is also no secret. CEO Elon Musk may be as well known for making controversial remarks as he is for being a visionary leader, and critics have long cheered for the company's demise. They've argued at one point or another that Tesla is bound for bankruptcy, its results are only propped up by government credits, or that competition will come along and wipe out its premium valuation.
Bears love to argue that the company is massively overvalued, saying it's driven mostly by hype, and in some ways that charge makes sense. At recent prices, Tesla has a market cap over $750 billion, while larger automakers like FordandGeneral Motorsare valued at just $48 billion and $51 billion.
However, apples-to-apples comparisons are difficult with these stocks since Tesla is a fast-growing electric vehicle maker with high profit margins, while Ford and GM are slow-growth, low-margin incumbents. Though both Ford and GM are transitioning to produce electric vehicles, their sales of EVs are only likely to cannibalize sales of their traditional combustion vehicles. It's a classic innovator's dilemma. Tesla, on the other hand, has a clear edge with a decade-long head start in EV technology as well as advantages like its supercharger network, well-loved brand, and it doesn't face the kind of conflicts that legacy automakers will, including dealer networks that are resistant to EV's since they require less maintenance. It also offers firmware-over-the-air updates, which most of its legacy competitors have been unable to match.
Not only that, but the numbers themselves don't indicate that Tesla is overvalued, at least not compared to the broader market.
The PEG ratio
There's no perfect way to value a stock. Many investors like to use the price-to-earnings ratio, which offers a good snapshot for how a company's price compares to its current earnings.
The flaw with the P/E ratio though is that it ignores a company's future growth, which is often the most important factor in determining its value. Tesla, for example, currently has a P/E ratio around 96, but it's expected to grow revenue by 59% this year, and earnings per share is forecast to jump 79% to $12.11, giving it a more reasonable forward P/E of almost 60.
The best way to measure both price-to-earnings and growth is with the PEG ratio, a favorite metric of famed hedge fund manager Peter Lynch. The PEG ratio divides the price-to-earnings ratio by the expected earnings growth rate, generally the compound average over the next five years.Since high P/E companies tend to have high growth rates, the PEG is a good way to compare valuations of both high- and low-growth stocks.
Lynch, who ran Fidelity's Magellan Fund in the '80s, theorized that an accurately valued stock would trade at a PEG of 1, while a PEG over 1 would indicate the stock was overvalued, and a PEG under 1 would mean that it's undervalued. However, back then, stock valuations were much lower, due in part to sky-high interest rates. The P/E of the S&P 500 was below 15 for nearly all of the time Lynch ran his fund. By comparison, since 2000, the P/E of the S&P 500 has almost never been below 15, in part because of the emergence of the fast-growing tech sector. As P/E ratios have inflated, so has the PEG, and a PEG of 1 no longer seems like an accurate benchmark.
At recent prices, Tesla trades at a moderate PEG of 1.66. That ratio actually makes the stock cheaper than the average stock on the Dow Jones Industrial Average, which has a PEG of 2.41. And that doesn't include the four stocks on the index that have negative PEG values due to expected declining earnings.
You can see the list below.
| Dow Component | PEG Ratio |
|---|
| American Express | 1.22 |
| Amgen | 1.42 |
| Apple | 2.36 |
| Boeing | 6.53 |
| Caterpillar | 1.56 |
| Cisco | 2.21 |
| Chevron | 3.85 |
| Home Depot | 2.31 |
| Honeywell | 1.85 |
| IBM | 1.53 |
| Intel | 2.10 |
| Johnson & Johnson | 3.39 |
| Coca-Cola | 3.36 |
| McDonald's | 3.69 |
| 3M | 1.81 |
| Merck | 1.11 |
| Microsoft | 1.71 |
| Nike | 1.69 |
| Procter & Gamble | 4.05 |
| Travelers | 1.68 |
| UnitedHealth | 1.74 |
| Salesforce | 1.76 |
| Verizon Communications | 4.67 |
| Visa | 1.32 |
| Walmart | 3.19 |
| Walt Disney | 0.55 |
| Average PEG ratio | 2.41 |
Data source: S&P Global Market Intelligence
Not only does the average Dow stock trade at a significantly higher PEG ratio than Tesla, but 19 of the 26 companies above are also more expensive than Tesla based on the PEG ratio. In other words, when you factor in growth, Tesla is cheaper than your typical blue-chip stock.
The PEG ratio isn't perfect, of course, and divining Tesla's growth rate, especially five years from now, may be a fool's errand. But it's a mistake to discount the company's growth rate, especially since Tesla has a solid track record of beating analyst estimates in recent years, topping them in 10 of the last 11 quarters.
Tesla is the clear leader in EVs, penetrating a massive addressable market that will take shape over the next 10 or 20 years. A lot can change during that time, and competition is likely to rise, but given Tesla's early leadership and brand strength, it's the clear favorite in the industry.
Bears will surely continue to knock the stock. But at this point, if you're arguing that it's overvalued, the numbers simply don't back that up.
American Express is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Jeremy Bowman has positions in Nike and Walt Disney. The Motley Fool has positions in and recommends Apple, Cisco Systems, Goldman Sachs, Home Depot, Intel, Microsoft, Nike, Salesforce, Inc., Tesla, Visa, and Walt Disney. The Motley Fool recommends 3M, Amgen, Johnson & Johnson, UnitedHealth Group, and Verizon Communications and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2024 $145 calls on Walt Disney, long January 2024 $47.50 calls on Coca-Cola, long March 2023 $120 calls on Apple, short January 2023 $57.50 puts on Intel, short January 2024 $155 calls on Walt Disney, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
FAQs
Warren Buffett focuses on valuation -- and Tesla has a premium valuation right now. More importantly, Buffett doesn't think he can project Tesla's earnings for five or more years into the future. It's possible that Buffett could change his mind about Tesla down the road.
What is the prediction for Tesla stock value? ›
Stock Price Forecast
The 34 analysts offering 12-month price forecasts for Tesla Inc have a median target of 193.70, with a high estimate of 300.00 and a low estimate of 71.00. The median estimate represents a -22.47% decrease from the last price of 249.84.
How overvalued is Tesla relative to its peers? ›
Price / sales, or price / revenue, is another valuation metric. Tesla trades for 8.4 times sales, which places it in the top 15 percent of companies in the S&P 500 index. GM and F, on the other hand, trade for less than 0.5 times revenue. By this measure, Tesla is worth over 17 times more.
What is the PE ratio of Tesla in 2023? ›
The price to earnings ratio is calculated by taking the latest closing price and dividing it by the most recent earnings per share (EPS) number. The PE ratio is a simple way to assess whether a stock is over or under valued and is the most widely used valuation measure. Tesla PE ratio as of June 07, 2023 is 65.09.
What does Warren Buffett say about Tesla? ›
Tesla Stock Continues Rebound As Warren Buffett Praises 'Brilliant' Elon Musk. Tesla (TSLA) continued its rebound Monday as Warren Buffett called CEO Elon Musk a "brilliant guy," and as the global EV giant is set to hold a ceremony at its new lithium refinery in Texas.
Who owns most of Tesla stock? ›
Who Owns Tesla Stock
| Holder | Common shares held (millions) | % of CSO (common stock outstanding) |
|---|
| Elon Musk | 423.6 | 13.4% |
| Vanguard Group | 213.0 | 6.8 |
| BlackRock (BLK) | 171.9 | 5.4 |
| State Street Global Advisors | 99.6 | 3.2 |
6 more rowsDec 16, 2022
Is Tesla stock a Buy, Sell or Hold? Tesla stock has received a consensus rating of buy. The average rating score is and is based on 62 buy ratings, 25 hold ratings, and 5 sell ratings.
What will Tesla stock be worth in 2025? ›
According to the latest long-term forecast, Tesla price will hit $400 by the end of 2023 and then $600 by the end of 2024. Tesla will rise to $900 within the year of 2025, $1000 in 2026, $1200 in 2027, $1400 in 2028, $1600 in 2029, $1700 in 2031, $1800 in 2032 and $2000 in 2034.
What will one Tesla stock be worth in 2030? ›
Long-Term Tesla Stock Price Predictions
| Year | Prediction | Change |
|---|
| 2027 | $ 1,117.53 | 357.57% |
| 2028 | $ 1,634.47 | 569.23% |
| 2029 | $ 2,390.52 | 878.80% |
| 2030 | $ 3,496.29 | 1,331.55% |
3 more rows“I think in 2025 it (Tesla) will be $500 to $600 (per share). And in eight to ten years, we ought to be somewhere around $4.5 trillion.” A market capitalization of $4.5 trillion would make Tesla more valuable than Apple and Saudi Aramco combined, a claim that Musk made in 2022.
For the first quarter of 2023, Wall Street expects Tesla to earn about 85 cents a share from $23.7 billion in sales. Three months ago Wall Street expected Tesla to earn about $1.05 a share. Year over year, sales are expected to be up about 26%.
Is Toyota better than Tesla? ›
Toyota. When comparing the Tesla brand to the Toyota brand, Tesla has the advantage in the areas of used car pricing, depreciation, horsepower, fuel efficiency, towing capacity, safety and retained value. Toyota has the advantage in the areas of overall quality, reliability and variety of models offered.
What will Tesla stock be worth in 2040? ›
Tesla stock predictions for 2040 & 2050—summary
| S&P 500 yearly avg. (+11.8%) | Nasdaq 100 yearly avg. (+17.5%) |
|---|
| TSLA price in 2040 | $1,541 | $3,770 |
| TSLA price in 2050 | $4,700 | $18,900 |
Feb 28, 2023
ARK's expected value for Tesla's stock price in 2027, based on our Monte Carlo analysis. We model a 25% probability that Tesla could be worth $1,400 per share or less in 2027. We model a 25% probability that Tesla could be worth $2,500 per share or more in 2027. Source: ARK Investment Management LLC, 2023.
What is the stock price forecast for Tesla in 2024? ›
As reported, Tesla (TSLA) share value is expected to reach up to $1105 by 2030 through a steady and gradual rise with forecasts for each year until then; $360 for 2023, $520 for 2024, $600 for 2025, $770for 2026, $910 for 2027, $970 for 2028, $1,050 for 2029 and so on.
Is Tesla stock good to buy right now? ›
The EPS Rating for Tesla stock is 93 out of 99. The market status is showing a "confirmed uptrend." Tesla stock has formed a valid base but TSLA is not a buy right now. However, Tesla stock is signaling a move above the 200-day line and 200 level and is approaching its current buy point.
What stock is Warren Buffet buying? ›
Paramount Global (PARA) and Louisiana Pacific (LPX) were new positions in Berkshire's portfolio last year. Buffett first bought Paramount PARA +0.1% in the first quarter of 2022 and Louisiana Pacific in the third quarter of 2022. He's owned Apple since 2016.
Is Tesla a financially healthy company? ›
Tesla reported record profits and record revenues for 2022, as the company heads into a new year facing a number of steep challenges. Profit for the year hit $12.6 billion, more than doubling since 2021 and beating the expectations of most analysts.
Is Tesla undervalued? ›
Tesla Stock Undervalued
At current prices, we view Tesla shares as undervalued, with the stock trading more than 20% below our updated fair value estimate. While we reduced our near-term outlook, our long-term view is unchanged. We think Tesla's plan to reduce costs will drive long-term profit margin expansion.
How much of Tesla does China own? ›
A Tesla store in Changzhou, China, in April 2022. Tencent, known as one of the world's largest gaming and social media firms, invested in Tesla in 2017, taking a 5% stake for around $1.78 billion.
Blackrock. Blackrock, the world's largest asset manager, is the second-biggest institutional investor in Tesla with a 5.62% stake valued at $36.56bn. Founded in 1988, the New York-based firm has a mix of institutional and retail clients worldwide.
Does Tesla pay a dividend? ›
TSLA does not currently pay a dividend.
Is Apple a buy sell or hold? ›
Apple's analyst rating consensus is a Strong Buy. This is based on the ratings of 29 Wall Streets Analysts. Open a brokerage account, see exclusive account opening deals on our Best Online Brokers page.
What is the 5 year prediction for Tesla stock? ›
The highest prediction stood at $430.33 while the lowest sat at $33.33. As for the Tesla long term forecast, Wallet Investor has estimated a Tesla 5 year forecast of $564.24 a share. Additionally, Gov Capital, another algorithm-based forecasting service, has a baseline Tesla stock 5-year forecast of $2,326.138.
What will Tesla prices be in 5 years? ›
On average, it will cost $57,369 to own a Tesla for 5 years. This includes depreciation, insurance, maintenance, financing charges and fuel costs. Depreciation, or the value that the car has lost over time, is generally predictable.
Will Tesla stock go up in 2023? ›
The Tesla share price is up over 100% in 2023.
How much will Apple stock be worth in 2030? ›
Long-Term Apple Stock Price Predictions
| Year | Prediction | Change |
|---|
| 2027 | $ 421.88 | 133.06% |
| 2028 | $ 521.26 | 187.95% |
| 2029 | $ 644.04 | 255.79% |
| 2030 | $ 795.76 | 339.60% |
3 more rowsIf the current performance trend continues, it's possible that Google's stock could reach $500 in the next 10 years. However, the potential for big gains depends on the type of investment strategy one chooses – whether it's a long-term or short-term approach.
How much will Amazon stock be worth in 2030? ›
What will the AMZN price be in 5 years and 10 years – forecast by years
| Year | Price in the middle of the year | Price at the end of the year |
|---|
| 2028 | $936.07 | $1248.09 |
| 2029 | $1229.18 | $1638.91 |
| 2030 | $1594.16 | $2125.54 |
| 2031 | $1843.78 | $2458.37 |
8 more rowsIn other words, a $10,000 investment in Tesla's IPO in 2010 would now be worth a staggering $2,643,178. For those of you keeping score at home, this equates to a 26,332% increase in value in just over 12 years.
If you had invested $1,000 in Tesla 5 years ago, you'd have $4,973 today, a gain of 397% Tesla share prices have fluctuated quite a bit since the company went public in 2010.
What would $10,000 invested in Tesla be worth today? ›
A $10,000 investment in TSLA on the day of its IPO would be worth more than $1.16 million as of April 6. See: Artificial Intelligence Stocks: The 10 Best AI Companies.
What will the Tesla stock price be at the end of 2023? ›
“Tesla's year-end market price for 2023 will be between $380 and the psychological threshold of $400, assuming that the stock market does not experience a significant downturn and there is no liquidity crisis.”
What is the forecast for Tesla sales in 2023? ›
Analysts predict Tesla deliveries to total 430,000 in the first quarter, according to FactSet. This would represent a 39% increase compared to the 310,000 deliveries for the same period in 2022. Wall Street forecasts Tesla deliveries in 2023 to come in around 1.8 million.
What is the Tesla q1 prediction for 2023? ›
Five Below, Inc. (FIVE)is reporting for the quarter ending April 30, 2023. The retail company's consensus earnings per share forecast from the 12 analysts that follow the stock is $0.62. This value represents a 5.08% increase compared to the same quarter last year.
Which car company beat Tesla? ›
BYD beats Tesla in 2022 EV sales, as the world's No 1 electric car seller vindicated Warren Buffett's bet.
Which is more expensive Toyota or Tesla? ›
Tesla Vehicles are Cheaper Than Toyota Vehicles
Toyota is generally associated with cost effective and efficient vehicles that are reliable and easy to own.
Is Tesla share price overvalued? ›
Trainer and his research team broke down multiple “inarguably best-case scenarios” for Tesla in their latest report, including one where the company becomes the largest automaker on the planet within a decade, and found that the stock is still “significantly overvalued.”
What will Tesla stock be worth in 2035? ›
Tesla Stock Price Prediction (2023-2060)
| Year | Maximum Price | Estimated Average |
|---|
| 2035 | $8981 | $9131 |
| 2036 | $11,798 | $11, 124 |
| 2037 | $14, 369 | $13, 986 |
| 2038 | $16,718 | $17568 |
16 more rowsMay 31, 2023
Apple Stock Price Prediction (2023-2060)
| Year | Minimum Price | Average Price |
|---|
| 2035 | $258.8 | $290.3 |
| 2040 | $284.68 | $316.18 |
| 2045 | $313.15 | $344.65 |
| 2050 | $344.47 | $375.97 |
10 more rows2 days ago
Average Price Target
Based on 30 Wall Street analysts offering 12 month price targets for Tesla in the last 3 months. The average price target is $202.84 with a high forecast of $280.00 and a low forecast of $115.00. The average price target represents a 20.75% change from the last price of $167.98.
How long is a Tesla projected to last? ›
According to Tesla's 2021 impact report, its batteries are designed to last the life of the vehicle, which the company estimates as roughly 200,000 miles in the U.S. and 150,000 miles in Europe.
What did Nikola Tesla predict? ›
He boldly predicted that one day it would be possible to transmit telephone signals, documents, music and video around the world using wireless technology. While this was something that he never achieved in his own lifetime, his prediction came true in the early 1990s with the invention of the world wide web.
Will stocks go back up in 2024? ›
The stock market is poised for a strong rally in 2024 as corporate earnings impress and trillions of dollars of sidelined cash gets invested, according to a Monday note from Bank of America.
Will 2024 be a good year for stocks? ›
Stocks expected to rise over next year
Through the first quarter of 2024, analysts expect the S&P 500 to climb 8 percent, to 4,289 from 3,970.99 when the survey closed on March 24.
What is Tesla's highest stock price? ›
Tesla - Stock Price History | TSLA
- The all-time high Tesla stock closing price was 409.97 on November 04, 2021.
- The Tesla 52-week high stock price is 314.67, which is 28.8% above the current share price.
- The Tesla 52-week low stock price is 101.81, which is 58.3% below the current share price.
Tesla Stock Prediction 2025
The Tesla stock prediction for 2025 is currently $ 443.67, assuming that Tesla shares will continue growing at the average yearly rate as they did in the last 10 years. This would represent a 113.91% increase in the TSLA stock price.
Why can t Tesla sell directly? ›
The electric car company Tesla, Inc. has faced dealership disputes in several U.S. states as a result of local laws. In the United States, direct manufacturer auto sales are prohibited in many states by franchise laws requiring that new cars be sold only by independent dealers.
Why doesn t Warren Buffett invest in real estate? ›
Buying and managing real estate is more of a business than it is an investment, and Buffett knows that his time is better spent choosing companies to invest in than it is running a real estate business.
The current portfolio value is calculated to be $325.11 Bil. The turnover rate is 2%. In Warren Buffett's current portfolio as of 2023-03-31, the top 5 holdings are Apple Inc (AAPL), Bank of America Corp (BAC), American Express Co (AXP), Coca-Cola Co (KO), Chevron Corp (CVX), not including call and put options.
What will Tesla stock be in 2050? ›
Tesla (TSLA) Stock Price Prediction and Forecast
| Year | Minimum Price | Maximum Price |
|---|
| 2030 | $1,081 | $1,105 |
| 2035 | $1,458 | $1,505 |
| 2040 | $1,952 | $1,996 |
| 2050 | $2,985 | $3,065 |
7 more rowsMay 11, 2023
Tesla stock price stood at $244.40
| Year | Mid-Year | Tod/End,% |
|---|
| 2029 | $1,576 | +558% |
| 2030 | $1,642 | +586% |
| 2031 | $1,714 | +617% |
| 2032 | $1,793 | +651% |
8 more rowsThe electric vehicle (EV) maker, Tesla, has a number of key risks that it will face in the next 5-10 years. Notable risks include Tesla cars being too expensive with tax breaks and that the construction of its Gigafactory (battery factory) taking longer than expected.
Why are Tesla stocks declining? ›
Tesla shares fell more than 10% after the company reported a more than 20% drop in both EPS and net income compared with the year-ago quarter. Analysts also expressed worry over continued price cuts, a prospect that CEO Elon Musk suggested was “the right choice” for Tesla.
How does Tesla get away with not having dealerships? ›
Traditional car distribution is centered on a huge inventory creation. Car manufacturers produce a large volume of cars and you drive away one of them home. Tesla have a long backlog and need not keep an inventory. Build the right product-market fit.
What REIT does Warren Buffett buy? ›
Out of more than 200 publicly-traded REITs in the U.S., only two companies have managed to attract Buffett: Store Capital (NYSE: STOR)3 and Seritage (NYSE: SRG)4.
Why most people don t invest in real estate? ›
Many people are unable to begin creating wealth due to fear. They're scared about money, or the negative things that come with owning rental properties—like evictions or repairs. I've done many episodes about fear, and I strongly believe that your ability to change your life lies in your ability to quiet your fears.
Who said real estate is the best investment? ›
Billionaire Andrew Carnegie famously said that 90% of millionaires got their wealth by investing in real estate.
Does Warren Buffett own Dairy Queen? ›
Warren Buffett's Berkshire Hathaway acquired Dairy Queen for nearly $600 million in 1998. Dairy Queen CEO Troy Bader told Insider that Berkshire's ownership lets him invest for the long run. Bader explained how Dairy Queen has dealt with the pandemic, inflation, and new customer demands.
“Price is what you pay, value is what you get.” This famous Buffett quote strikes at the heart of the “value investor” approach and reveals the secret of how Buffett made his fortune.
Does Warren Buffett own Johnson and Johnson? ›
Berkshire Hathaway's Johnson & Johnson Stake
Warren Buffett acquired 327 Thousand Johnson & Johnson shares worth $52.3 Million. That's 0.02% of their equity portfolio (38th largest holding). The first Johnson & Johnson trade was made in Q1 2006.
