Tesla’s (TSLA) recent robotaxi launch has raised new questions about whether the company’s high stock price makes sense. Some investors are worried that the stock already assumes thousands of self-driving Teslas are on U.S. roads, each making less than $10 per ride, which is a future that’s not here yet. Chad Morganlander from Washington Crossing Advisors, which is owned by Stifel (SF), told Yahoo Finance that the excitement feels overblown and pointed out that Tesla trades at ten times revenue, which he called “insane.” As a result, he prefers investing in Alphabet (GOOGL), which backs Waymo’s self-driving taxi service that’s already operating in several cities since 2018.
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Beyond revenue, Tesla’s stock also looks expensive based on earnings. It currently trades at 178 times its expected earnings, while the average company in the S&P 500 (SPY) trades at just 21 times. Analysts have also lowered their expectations for Tesla’s future earnings, with projected earnings per share for 2025, 2026, and 2027 dropping by more than 70% since October 2022. Another concern is that tax credits for electric vehicles—which have helped Tesla’s sales and profits—might disappear. Analyst Ryan Brinkman from JPMorgan estimates that more than half of Tesla’s current profits depend on these subsidies, which could vanish with a new “big, beautiful” bill.
Investors are also still reacting to Tesla’s disappointing first-quarter results, where it missed expectations for both revenue and earnings due to weaker demand for electric cars and controversy over Elon Musk’s political involvement. Tim Urbanowicz from Innovator ETFs said that Tesla often sets ambitious goals, but reaching them usually takes longer than expected. He warned that while Tesla’s vision is bold, the stock’s high price may not be justified unless the company starts delivering results much faster.
What Is the Prediction for Tesla Stock?
Turning to Wall Street, analysts have a Hold consensus rating on TSLA stock based on 14 Buys, 12 Holds, and nine Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average TSLA price target of $287 per share implies 16.6% downside risk.
