Over the past year, some of the wind has been taken out of the sails of Tesla (NASDAQ:TSLA) stock. After several years of explosive share price gains, the price is flat on 12-month basis. Yet with recent events including the much anticipated robotaxi reveal, I’m curious to see what the experts think regarding growth prospects for the coming couple of years.
Looking at the numbers
To get a feel for the stock’s growth potential, I can look at the forecast earnings per share. Typically, the share price trades at a multiple of the latest earnings. At the moment, the Tesla price-to-earnings (P/E) ratio is 62. So although this fluctuates over time, I can look at the EPS forecast and then can estimate the share price.
EPS for 2023 were $3.12. This was made public in early 2024. So the 2024 figure will come out in early 2025 and so on. From a group of 36 analysts, the 2024 EPS figure is estimated at $2.28. For 2025 this jumps to $3.03.
Based on the $3.12 from last year, I can see that the growth forecast is actually negative for this current year, before rallying next year. To some extent this makes sense. The business delivery numbers for Q1 and Q2 were down year on year, the first time this has happened in almost a decade. Q3 figures were better, but there’s some concern that competitors are catching up to Tesla and eating away at market share.
From earnings to share price
If I assumed that the P/E ratio stayed the same, it could indicate a share price for next year of $141. This would be a sharp fall from the current price of $220. However, I have to take this forecast with a pinch of salt.
Forecasts do not equate to facts. Tesla could perform well to finish this year, causing expectations for earnings to rise. Further, trying to predict company performance in 2025 and beyond is incredibly difficult to get correct right now.
On Wednesday (23 October) we get the Q3 financial results, which I think will be a key event for the stock direction through to the end of the year. Not only will this impact earnings, but it could be a positive driver for sentiment too. Put another way, an upbeat report could spark a rally even if it’s not specifically related to earnings. Chatter around new production facilities, product launches, partnerships or other factors could influence things.
Keeping a close eye
On paper, the current growth forecast for Tesla shares doesn’t look great. However, I’m still going to keep the stock on my watchlist, especially with the earnings report coming up later this week. Should expectations materially change in the coming months, it’s definitely a stock I’d consider owning in the future.
