Tesla (NASDAQ:TSLA) shares hit record highs at the end of 2024, partly driven by the election of Elon Musk-ally Donald Trump. And despite some recent pullback in the share price (this time partly due to underwhelming vehicle deliveries), a £10,000 investment in 2019 would now be worth £128k.
Analysts are screaming Sell
Institutional analysts — those from big banks and brokerages — collectively still have a Hold rating on Tesla stock. But every recent article I’ve read by analysts like me suggest that shareholders should be ditching their Tesla shares and looking for better opportunities elsewhere. And the reasoning for this bearishness is simple, the price of Tesla shares is 174 times greater than the company’s earnings over the past 12 months.
What’s more, most analysts, institutional or otherwise, are finding it very hard to quantify the potential of some of Elon Musk’s plans for the company. In fact, collectively analysts believe that Tesla will only grow earnings by around 9% annually — you can find better growth rates in the UK banking sector.
It’s not just a car company
Elon Musk will tell you that Tesla is much more than a car company. He hopes to see Tesla lead the way in autonomous driving — although it does seem to be losing ground — and robotics. If successful, Tesla’s autonomous driving technology could revolutionise transportation, creating a new revenue stream through software licensing and ride-hailing services.
Similarly, advancements in robotics could position Tesla as a leader in automation, with applications ranging from manufacturing to household tasks. Cathie Wood, founder of ARK Invest, has even forecasted Tesla’s stock could reach $2,600 by 2029, assuming breakthroughs in these areas materialise, which many critics see as overly optimistic.
And what about Tesla on Mars?
Musk’s plans for Tesla aren’t solely confined to this planet. Instead, he envisions Tesla’s humanoid Optimus robots being deployed to Mars in order to create a habitable environment for humans. The Cybertruck could provide suitable means of transportation, while Tesla’s energy solutions, like solar panels and Powerwall batteries, could provide sustainable energy for Martian habitats.
And for further context, Musk’s other companies are also geared towards achieving an intra-planetary existence — SpaceX to get there, Neuralink to control robots with brainwaves, and the Boring Company to build subterranean environments to shelter from the weather on Mars. Unsurprisingly, the economic angle for the Mars programme is almost impossible to quantify. We haven’t colonised another planet before.
So, what’s next?
Tesla is undoubtedly the hardest mega-cap stock to value. Is it a car company valued at 174 times earnings or is it going to be instrumental in colonising Mars in the next 15 years? This is a question that analysts are grappling with around the world.
I’d suggest that Charlie Munger’s 2020 Tesla assessment remains prescient: “My thoughts are two: I would never buy it (Tesla), and I would never sell it short… and I have a third comment, never underestimate the man who overestimates himself.”
With his ambition and political sway, it’s certainly hard to bet against the world’s wealthiest man.
