Tesla (NASDAQ:TSLA) stock has had a strong 12 months, surging 34%. However, UK-based shareholders have had to contend with some currency appreciation. The pound has strengthened 2% against the dollar over the same period.
That means a £10,000 stake would have grown to roughly £13,600. That’s a gain of £3,600, or around 36% in dollar terms before sterling’s rise trims things back slightly.
So, what changed to deliver such an uplift?
It definitely wasn’t undervalued
Was Tesla stock clearly undervalued a year ago? Absolutely not.
The stock was trading around 100 times forward earnings. It’s worth noting that it was a particularly volatile week this time last year as Trump’s Liberation Day tariffs ripped through global markets.
At that valuation, a lot of analysts would have said the market was already pricing in near-perfect execution on autonomous vehicles, robotaxis, and energy storage. These were businesses that remained largely unproven.
For a company facing intensifying EV competition, shrinking margins, and a CEO whose attention was visibly divided (as head of DOGE), “undervalued” was the last word most serious analysts would have reached for.
Interestingly, that outlook picture hasn’t exactly improved since. Sales have softened in key markets and the brand has taken on political baggage that’s proving difficult to shake.
If anything, the bull case has narrowed somewhat. It’s now resting almost entirely on robotaxi and AI ambitions that seemingly remain years from meaningful revenue.
For some, that narrowing might have been a good thing. It makes the investment thesis a little easier to understand. What’s more, the rift between the president and Musk was short-lived, perhaps contributing to the thesis.
However, one thing is clear, the stock is disconnected from the valuation. It trades at 156 times forward earnings today, with a price-to-earnings-to-growth (PEG) ratio of 3.6. Investors are betting on technological dominance.
Ahead of the rest
Tesla is clearly a leader, if not the leader, in autonomous driving. Its Full Self-Driving software has logged more real-world miles than virtually any competitor, and the data advantage that comes with its scale is genuinely hard to replicate.
Waymo may be grabbing headlines with its robotaxi rollout, but Tesla’s fleet is orders of magnitude larger. If autonomous driving becomes the defining technology of the next decade, Tesla will likely be first in line — and markets, it seems, are willing to pay handsomely for that possibility.
And in the long run, Musk wants to go further — literally.
His vision extends to Moon and Mars colonisation, with Tesla’s Optimus humanoid robot potentially forming the labour backbone of those civilisations. It’s a breathtaking ambition, and Optimus has shown genuine early promise on the factory floor.
However, these are long-term bets. I think Tesla is worth considering for investors who believe in Musk’s grand vision — but the valuation offers no backstop. This is why I haven’t taken the plunge yet: the price demands that most of this comes true, and there’s no margin of safety, no floor to fall back on if it doesn’t.
