Has a 2025 Tesla stock crash already started?

Tesla stock has been on a big climb in the past few months. But are investors being a bit over-ambitious about its 2025 prospects?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Electric cars charging in station

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Anyone who bought Tesla (NASDAQ: TSLA) stock five years ago would be sitting on a gain of more than 1,100% today. But they’d have been on a bit of an up-and-down ride between then and now.

The price climbed sharply higher when CEO Elon Musk got his foot in with the new US adminstration. Investors seemingly assumed his relationship with President Trump should help give his companies a boost.

But even now, Tesla stock is still only a little above the highs it reached in late 2021. Anyone who happened to buy at the peak back then would have had to wait three years just to break even.

Should you invest £1,000 in British Land Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if British Land Plc made the list?

See the 6 stocks

Created with Highcharts 11.4.3Tesla PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Electric vehicles

The future for vehicles is surely electric. But a few things make me suspect Tesla shareholders might be in for a disappointing ride in 2025.

One of them comes from Donald Trump himself. In his inaugural address, he said “We will end the Green New Deal, and we will revoke the electric-vehicle mandate, saving our auto industry“.

On top of his oil pledge to “drill baby, drill,” that doesn’t read like good news for the electric vehicle (EV) industry to me. Or, specifically, for Tesla.

Another thing is Tesla’s super high valuation. We all expect high-tech Nasdaq growth stocks to be on high valuations, for sure. The kind of growth we could see from them has to be worth a handsome premium.

But Tesla’s valuation makes the rest of the so-called Magnificent Seven Nasdaq stocks look like bargain-basement buys.

Nvidia, cheap?

Six of the seven are on forward price-to-earnings (P/E) ratios that range from 25 (Alphabet) to 50 (Nvidia). And then we have Tesla’s P/E up at 201. Nvidia might have a market capitalisation of a whopping $3.6trn. But on a per-share basis, Tesla’s valuation is four times as high.

Admittedly, forecasts for earnings growth suggest that ratio of 201 should come down to 113 by 2026. But that’s still high compared to the others.

Consensus price targets for Tesla right now range from a low of $125 to a high of $528 (omitting the $2,600 target that Cathie Wood of Ark Invest put on the stock last year)

So, brokers think Tesla could fall 70%, or gain 26%, from the price at the time of writing. Know what I think? I think it means these clever analysts haven’t really got a clue. And to be honest, neither have I. But I do know Tesla has already fallen 14% from last month’s high.

Tesla bull

I’m bullish about the long-term future for Tesla. I’m just unsure about the current valuation. Investors need to be able to handle short-term swings, perhaps even some big ones. But at my age, I don’t have what it takes to grit my teeth and buy something when I think it looks toppy.

Still, I could change my mind and buy some if it really does crash in 2025. In fact, I think I might find it hard not to.

Like buying £1 for 31p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Alphabet, Nvidia, and Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

We think earning passive income has never been easier

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Dividend Shares

2 ‘safe’ LSE dividend stocks to consider as global markets sell off

As global markets experience high levels of volatility due to economic uncertainty, investors are piling into these ‘safe-haven’ dividend stocks.

Read more »

Investing Articles

US stock market rout: an unmissable opportunity for investors?

His tech-heavy portfolio has been smashed by Trump’s tariffs. However, Dr James Fox believes there could be some opportunities in…

Read more »

Investing Articles

After a 13% ‘Trump tariff’ fall, is the Barclays share price too cheap to miss?

Does the Barclays share price fall mean we should all panic and run screaming from the stock market? Nah, of…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

2 investment trusts to consider for a Stocks and Shares ISA

These two investment trusts have a different focus -- but our writer sees both as worth considering, one more for…

Read more »

Investing Articles

Deutsche Bank reiterates Buy rating on 9.6% yielding FTSE 250 stock that was “most shorted in UK”

Our writer investigates why a major broker remains optimistic about a FTSE 250 stock that was once the most shorted…

Read more »

Investing Articles

2 things to remember when stock markets are turbulent

US trade policy has rattled the stock markets in New York, London and elsewhere. Our writer outlines a couple of…

Read more »

Investing Articles

Are Trump’s tariffs a once-in-a-lifetime chance for ISA investors to get rich?

The £20,000 Stocks and Shares ISA limit will reset on 6 April. Smart investors could use current market volatility to…

Read more »

Investing Articles

Here are the latest Persimmon share price and dividend forecasts

Our writer looks at the latest forecasts for the Persimmon share price and considers what level of dividend the stock…

Read more »