Tesla (NASDAQ:TSLA) stock keeps on falling, but it’s not really looking much cheaper. The electric vehicle (EV) manufacturer has lost its dominant position in the market and is no longer growing — at least that’s what the most recent delivery figures suggest. I don’t think the valuation can be justified despite the company’s positioning in the self-driving segment.
Deliveries stun
Tesla vastly underdelivered during Q1. On Tuesday 2 April, the company said it delivered 386,810 vehicles in Q1 and produced 433,371 vehicles. By comparison, the Elon Musk-company delivered a total of 484,507 vehicles in Q4 of 2023 and delivered 422,875 in Q1 of 2023. This was a considerable miss versus expectations, even after analysts had slashed their estimates in recent weeks. The declining volume was put down to factory shutdowns, an arson attack at its Gigafactory Berlin, and diversions caused by the attacks on shipping lanes in the Red Sea.
Extremely expensive
There’s only one other car company that trades at more than 50 times earnings, and that’s Ferrari. However, these are two very different companies. Tesla has historically traded at a premium because of its strong growth trajectory, and margins — although these margins are nowhere near as strong as Ferrari’s. However, margins have been contracting and the growth story just isn’t as strong.
Currently, and despite the share price falling 33% since the turn of the year, Tesla is trading at 58.6 times forward earnings. In 2025, that number is expected to fall to 42.1 times. Moving forward, the price-to-earnings ratio is forecast to fall to 35.4 times in 2026, and 29.2 times in 2027.
While the growth may look appealing, the stock still looks overvalued according to medium-term growth expectations. And a sign of that is the price-to-earnings-to-growth (PEG) ratio which stands at 3.83. When we remember that fair value is indicated by the number ‘one’, 3.83 suggests that Tesla is vastly overvalued.
More to offer
Tesla has more to offer than medium-term growth. But this is where it gets a little speculative. Tesla is no longer the world’s largest producer of EVs, but it’s positioning itself as a leader in self-driving. And while autopilot comes as standard on all new Tesla cars, we probably won’t see truly autonomous vehicles on our roads until the 2030s.
In the long run, Musk is looking at the possibility of creating an autonomous fleet of taxis. Cutting out the middle men, this has the capacity of being a huge revenue generating opportunity. However, the issue is that we’re still some distance away from seeing this happen.
So, while Tesla might have more to offer, we’re talking so many years into the future that an investment becomes pretty speculative. In fact, we could see other companies take a commanding position in the self-driving sector by then. As much as I love what Tesla is doing, and has done, I’m not sure I can put my money behind the company at this moment in time.
