Merely put, it has been a wild 2025 journey up to now for Tesla (NASDAQ: TSLA). Firstly of the 12 months, the Tesla inventory worth was over $400. It has since hit $428 – and $222.
However whereas the short-term gyrations are dizzying, I’m a long-term investor and so want to face again and have a look at the larger image. Tesla has soared over the previous 12 months, with the inventory now 90% larger than it was simply 12 months in the past.
Over a five-year timeframe, the achieve has been an outstanding 530%.
I’ve lengthy admired the enterprise. It has been on the ropes earlier than and fought again. It has established a number one electrical automobile (EV) enterprise at breakneck velocity, is rising its energy storage enterprise at a price of knots and advantages from a robust model, a vertically built-in enterprise mannequin that cuts out advertising prices, and plenty of proprietary expertise.
So may now be the second so as to add it to my portfolio? Or would possibly it nonetheless have an extended technique to fall?
Previous however legitimate valuation issues
I reckon the share worth may nonetheless have an extended technique to fall and won’t be investing for now.
Nearly for its complete life as a listed firm, a vocal and enormous variety of buyers have been scoffing at what they noticed as an unsustainable share worth for Tesla. But, as I outlined above, over time it has moved upwards seemingly untethered to many conventional valuation metrics, reminiscent of share worth to earnings per share.
Nonetheless, that price-to-earnings (P/E) ratio now stands at 189. To me that doesn’t look simply overpriced, it appears untouchably pink sizzling. It’s far above what I might be prepared to pay for Tesla inventory.
Not solely that, however I believe issues may but worsen from right here. Final 12 months, Tesla’s automobile gross sales volumes declined barely. The primary quarter of 2025 noticed a a lot sharper year-on-year decline, in addition to a tumble in earnings.
With the EV market now extremely aggressive, due to the likes of BYD, and whereas Tesla is shedding market share, I believe earnings may fall this 12 months and maybe past. So the valuation metric I discussed above could not even totally seize how costly the possible P/E ratio is.
Why Tesla would possibly nonetheless be a long-term cut price
Regardless of all that, loads of buyers proceed to maintain the religion. Tesla’s automotive enterprise has lengthy been a battle towards unhealthy odds, however administration has confirmed again and again it has been capable of manoeuvre the carmaker ahead at velocity.
New income streams slated to come back on stream quickly embrace making lorries at scale. Different potential product traces embrace automated taxis and robotics. Each may very well be big. Tesla has a compelling mixture of {hardware} manufacturing know-how, software program functionality and consumer knowledge to assist it carve out a robust aggressive place.
On prime of that, the ability storage enterprise may continue to grow very quick, probably making a major contribution to the corporate’s prime and backside traces in years to come back.
If that each one goes effectively, right this moment’s Tesla inventory worth could but appear like a cut price within the rear view mirror.
However getting all of it proper is a tricky activity. It stays to be seen whether or not the corporate can pull it off. For now, I cannot be shopping for Tesla inventory.
