Merely put, it has been a wild 2025 journey thus far for Tesla (NASDAQ: TSLA). In the beginning 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 favor to face again and take 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 car (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 and marketing 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 method to fall?
Outdated however legitimate valuation issues
I reckon the share worth may nonetheless have an extended method to fall and won’t be investing for now.
Nearly for its total 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, corresponding to 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 seems to be untouchably crimson 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 car 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 discount
Regardless of all that, plenty of buyers proceed to maintain the religion. Tesla’s automotive enterprise has lengthy been a battle towards dangerous odds, however administration has confirmed repeatedly it has been capable of manoeuvre the carmaker ahead at velocity.
New income streams slated to return on stream quickly embody making lorries at scale. Different potential product strains embody automated taxis and robotics. Each could possibly be large. Tesla has a compelling mixture of {hardware} manufacturing know-how, software program functionality and consumer information to assist it carve out a robust aggressive place.
On prime of that, the ability storage enterprise may continue to grow very quick, doubtlessly making a major contribution to the corporate’s prime and backside strains in years to return.
If that each one goes effectively, at the moment’s Tesla inventory worth could but seem like a discount within the rear view mirror.
However getting all of it proper is a troublesome process. It stays to be seen whether or not the corporate can pull it off. For now, I cannot be shopping for Tesla inventory.
