Despite all the ups and downs, Tesla (NASDAQ:TSLA) stock’s been a remarkable market-beating investment over the last five years. Shareholders have reaped close to a 530% gain since May 2020, transforming a simple £5,000 investment into £31,500. And Elon Musk is now back at the helm after a short stint at the US Department of Government Efficiency. So Tesla shares have begun recovering from their recent crash.
So is now a good time to jump in and buy Tesla shares for the long run? Here’s what the experts are saying.
Tesla might be overpriced
Even after seeing half of its market-cap wiped out in the face of political protests and falling car delivery figures, Tesla stock trades at a forward price-to-earnings ratio of 160!
This premium valuation isn’t a massive surprise for long-time shareholders. The electric vehicle (EV) business has always traded at lofty multiples as a result of its impressive growth over the last decade. However, it seems investor expectations might have gotten out of hand when looking at the share price targets from institutional investors.
While some are projecting further increases moving forward, the average consensus suggests that the share price is currently 13% overvalued. And that the fair value of the business is around $300 a share. If that’s the case, then putting £5,000 to work today might only be worth £4,350 by this time next year.
Forecasts aren’t set in stone
While analyst projects can be useful, they’re rarely accurate. Therefore, it’s certainly possible that Tesla stock may continue to grow from here. After all, the group’s ongoing refresh of its series of flagship vehicles could spark fresh interest. That’s especially so with Musk’s political involvement dying down.
At the same time, the company’s planning to launch its affordable Model Q in June with first deliveries likely emerging around April 2026.
Providing the new EV is well-received, that could be the key for making this type of vehicle more accessible to a broader range of households. This potentially serves as a catalyst to rebound vehicle delivery numbers. And Tesla’s other ventures into automation and robotics are also on track to emerge in the coming years. So the stock price could have the potential to climb.
Having said that, the opposite could also be true. Tesla’s affordable EV is a bit late to the party. Companies like BYD in China already have affordable EV offerings that could undercut Tesla’s future car sales.
In the US, the business is partially insulated by 100% tariffs against Chinese EVs. But in Europe, the tariffs are closer to 30%, offering far less protection against its Asian rivals. And with other European car manufacturers now expanding into the EV space, local competition could further intensify pressure on Tesla’s growth trajectory.
The bottom line
All things considered, Tesla stock seems like a risky investment in 2025. There’s no denying the group’s dominant position and impressive technologies. But the valuation implies that a lot of future growth expectations have already been baked into the share price.
We’ve already seen the impact of one bad quarter of weaker vehicle deliveries. And should this repeat itself, shareholders could be in for quite a volatile ride. For now, this business is staying on my watchlist.
