There rarely seems to be a dull year for Tesla (NASDAQ: TSLA). But even by the electric vehicle (EV) maker’s standards, 2025 has been a year with lots going on – and Tesla stock has been on a wild ride.
Back in January, it cost around $404. Today the share sells for about $459. That means Tesla stock has moved up by 14% over the course of the year to date.
By some of its historical standards, a 14% price movement is modest for Tesla. Over five years, the share has moved up 98%.
Along the way this year though, there have been some big swings. In March, for example, Tesla stock was selling for less than half its current price.
It rose briefly before slumping again to the same low levels in the first part of April, as the US changed its tariff policy, dramatically increasing business uncertainty.
Since that point in April, Tesla stock has more than doubled, moving up 108%.
Investors continue to like the growth story
Tesla does not pay a dividend. I also do not expect it to pay one any time soon. Changes in US subsidy policy are a risk to Tesla’s profitability. Even if it does generate spare cash in coming years, I expect it will want to spend it on trying to ramp up possible areas of business growth, such as self-driving taxis and robotics.
Still, the share price growth alone since April has been remarkable.
This is not some small company off investors’ radar, but a high-profile business that currently commands a market capitalisation of $1.4trn. At that level, a share price more than doubling in eight months defies a lot of economic thinking about the supposed rationality of stock markets.
Sure, tariffs posed risks to Tesla back then, as they continue to do so. Other risks included growing competition in the electric vehicle market, which I think continues to be a risk, and a slowdown in Tesla’s first half sales.
The investment case has become stronger again lately, in my view, with the company’s vehicle sales volumes and power system deployment in the most recent quarter setting new records.
That can help explain some of the recent strong performance in Tesla stock.
This share looks wildly overvalued to me!
Still, while I see those as positive developments, I see little relation to the current Tesla stock valuation. The company sells on a price-to-earnings ratio of 307. That strikes me as far too high to justify in terms of business fundamentals.
That is based on current earnings, but I see a risk earnings could fall further due to tough competition and reduced subsidies in the car business.
While the recent record-setting quarter saw revenues grow 12% year-on-year, net income attributable to common stockholders (using a generally accepted accounting principles (GAAP) reporting methodology) fell 37%.
It is always important as an investor not to read too much into a single quarter’s numbers. But those earnings are heading in the wrong direction for my taste.
I see Tesla stock as badly overvalued and have no plans to buy.
