Finance

Tesla is plummeting, but at least it’s cheaper, right? No.


Tesla (Tesla) is off to a terrible start in 2024. But by one key metric, Tesla’s stock price isn’t significantly cheaper.




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Typically, when a stock sells off sharply, investors and Wall Street analysts will tout it as a buy, citing its much cheaper valuation.

Tesla’s stock price plunged 29.25% in the first quarter, making it the worst-performing stock in the S&P 500 Index. Shares are 57.5% below their all-time high in late 2021. Tesla largely tracked lower profit expectations as deliveries fell below expectations despite continued price cuts.

Tesla stock valuation

date Tesla stock price 2024 EPS Forecast 2024 Price to Earnings Ratio 2025 EPS Forecast 2025 P/E Ratio
December 30, 2022 123.18 $7.07 17.4 $7.93 15.5
March 31, 2023 207.46 $5.62 36.9 $6.95 29.8
September 29, 2023 250.22 $4.68 53.5 $6.21 40.3
October 31, 2023 200.84 $3.93 51.1 $5.54 36.2
November 30, 2023 240.08 $3.85 62.3 $5.40 44.5
December 29, 2023 248.48 $3.79 65.5 $5.27 47.2
January 31, 2024 187.29 $3.14 59.7 $4.38 42.8
February 29, 2024 201.88 $3.10 65.2 $4.25 47.5
March 28, 2024 175.79 $2.87 61.25 $3.91 45
Source: Fact Set

Analysts have lowered their 2024 earnings per share target to $2.87, down from $3.79 at the end of 2023, $5.62 per share at the end of March 2023 and $7.07 at the end of 2022, according to FactSet.

As a result, the forward price-to-earnings ratio for Tesla stock as of March 30 was 61.25, down from 65.2 on February 29 and 65.5 at the end of last year, but higher than the September 30 level. As of March 31, the 2024 P/E ratio was 36.9, not to mention the end-2022 P/E ratio of 17.4.

The same trend applies to 2025. Analysts lowered Tesla’s 2025 earnings per share forecast to $3.91, compared with $5.27 at the end of last year. (It’s worth noting that this number is currently below Tesla’s peak earnings of $4.07 per share in 2022.) Analysts expect $6.95 on March 31, 2023, $7.93 at the end of 2022.

Tesla’s 2025 price-to-earnings ratio is currently 45, lower than 47.5 on February 29 and 47.2 on December 29, but higher than 40.3 on September 29, which is a significant increase from 29.8 at the end of 2025. 2023 End of 2022 15.5.

Keep in mind that analysts who have recently updated their forecasts are forecasting 2024 and 2025 EPS well below consensus, as many other analysts have yet to update their forecasts.

Following the release of first-quarter delivery data on April 2, Wall Street is likely to lower its profit target further. The official consensus has dropped to 457,000 units, but Wall Street’s actual view seems to be around 420,000 units, which is not low.

Tesla’s valuation is much higher than other profitable automakers. Toyota Automotive (TM value) has a forward price-to-earnings ratio of 10. General Motors (General Motors) has a forward price-to-earnings ratio of 5. Among electric vehicle manufacturers, ideal car (LI) has a forward price-to-earnings ratio of 15.Electric car giant BYD (BYD Dongfeng), with a forward price-to-earnings ratio of 14.

ferrari (Race) is the only company close to Tesla, with a forward price-to-earnings ratio of 51.

Investor’s Business Daily doesn’t typically focus on P/E ratios because many leading stocks are highly valued and investors are betting on strong growth to justify them. During its tremendous growth, Tesla was a growth company with a high price-to-earnings ratio. But it is not a public company. Now a growth company.

The Tesla Stock Bull Case

Increasingly, of course, the bull case for Tesla is looking beyond 2025, to the next generation of small electric cars and beyond. Some analysts, most notably Morgan Stanley’s Adam Jonas, blame much of Tesla stock on their price targets outside of electric vehicles and in areas such as autonomous driving, robotics and artificial intelligence.

Clearly, much, if not most, of Tesla’s current market valuation is a bet that some of these moonshots will pay off in the future, resulting in huge profits.

Whether they pay off is an open question.

But Tesla stock still isn’t cheap.

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