Tesla (TSLA) stock is one of the most perplexing investments on the public market. On one hand, it’s absolutely overvalued based on traditional valuation parameters, but on the other hand, market sentiment for the stock is both sustainable and positively unpredictable.
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With the company’s autonomy initiatives gaining momentum and substantial retooling efforts underway in 2025, Tesla is positioning itself for more stable financial growth starting in 2026 and beyond. Given current valuation levels, I believe this remains an attractive entry point for long-term investors. I continue to maintain a Bullish outlook on the stock.
Tesla’s Financial Foundations Invigorate Autonomy Upside
Tesla is in a fortunate position, as it has nearly $37 billion in total cash and short-term investments to support its autonomy plans. Moreover, over the last 12 months, it has reported $3.36 billion in levered free cash flow (after paying interest on its debt). Capital expenditures (Capex) have been approximately $10 billion per year over the past few years, with cash from operations at around $15 billion; research and development (R&D) expenses are nearing $5 billion.
Overall, this provides a solid financial foundation for the company, reflecting a high level of economic independence that enables it to be aggressive in building structural moats, such as in AI and robotics. It also reduces the need for debt in the long term.
Tesla bulls, including major institutional investors, argue that the company’s market capitalization could expand significantly if its autonomous driving roadmap materializes. ARK Invest, led by Cathie Wood, projects $951 billion in robotaxi revenue for Tesla by 2029—a figure that stands in stark contrast to Tesla’s current total revenue of approximately $96 billion.
While ARK’s forecast is bold, I view it as highly optimistic. Wedbush has also issued a bullish outlook, suggesting that successful execution in autonomy could double Tesla’s market cap to around $2 trillion by the end of 2026. Though aggressive, that estimate is somewhat more grounded.
Personally, I take a more conservative approach. I project a Tesla stock price of around $1,125 by 2030, which would represent a roughly 30% annualized return from the current level of $315. While the upside could exceed this, I believe higher projections begin to cross into speculative territory—something I aim to avoid when making risk-adjusted, long-term investment decisions. I remain a shareholder, but with more tempered expectations than some of the most bullish voices in the market.
Tesla’s Valuation is Uniquely High, but Also Sustainable
With a trailing 12-month normalized price-to-earnings ratio of 141, compared to the sector median of 16, it’s not surprising that Tesla stock carries a Hold consensus on Wall Street and is viewed with skepticism by much of the market. The company’s year-over-year contraction in diluted earnings per share is also -56%, compared to just -0.21% for the sector.
Therefore, something else is sustaining Tesla’s incredible valuation, and the answer is its brand and iconic status defined by the leadership of Elon Musk. However, this alone isn’t enough to sustain a stock valuation in the long term—the company must deliver on the autonomy roadmap it has promised, and I believe it will.
If the company can deliver $15 in normalized earnings per share in 2030, then the stock price could rise to my target of $1,125 even if the price-to-earnings ratio contracts to a more reasonable 75. The market could decide to value the stock continuously at a price-to-earnings ratio of 100 or above. Still, I expect some compression in the earnings multiple as profitability scales and the initial autonomy scale-up reaches its first climax.
Operational Moat and Undervalued Catalysts Further Support Future Returns
Tesla Insurance is also growing rapidly, with approximately $500 million in premiums, representing a 115% year-over-year increase. Over the long term, Musk has previously stated that he expects insurance to account for about 30-40% of the auto business value. TipRanks data shows that Energy Storage is also performing well, with around $10.1 billion in revenue, up 67% in 2024, which could make it a multi-billion-dollar profit contributor by 2027.
Regarding its robotaxi plans, TSLA is significantly ahead of competitors like Waymo, which has only 40 million miles of data. Tesla’s war chest of high-value, real-world training data substantially accelerates the company’s long-term AI and FSD (Full Self-Driving) development, positioning it to dominate once it receives widespread regulatory clearance and its infrastructure is operational at scale.
That said, if Tesla were to experience non-trivial safety incidents involving its robotaxis—or if regulatory hurdles significantly delay the deployment of autonomous vehicles in key markets—future returns could be adversely impacted. However, in my view, the long-term upside potential meaningfully outweighs these risks, making the investment case compelling overall.
Is Tesla a Buy, Sell, or Hold?
On Wall Street, Tesla has a consensus Hold rating based on 14 Buys, 12 Holds, and nine Sells. The average TSLA price target of $293.09 indicates a marginal upside potential of less than 1% over the next 12 months. This suggests that there could be some near-term headwinds, but Wedbush, the firm that believes the company’s market cap could double in a year, has set a 12-month price target of $500.
Overlooked Market Giant Hides in Plain Sight
Sometimes, the most significant investments are those that are underappreciated by the market in the near term, and those that are high-stakes enough to yield huge returns in the long run. It’s somewhat ironic to call Tesla stock “underappreciated,” given its high valuation. However, once a market becomes accustomed to a stock price, it won’t dramatically decline without significant selling pressure, even if some negative sentiment builds.
Currently, enough investors are enthralled by Musk’s current autonomy direction that it’s generally sustaining sentiment. Once the tangible results become more visible at scale, I expect this stock could surpass $500 sooner than most analysts currently anticipate.