Where Data Tells the Story
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As of market close on July 23, Tesla’s share price was down 18 percent this year. While that may sound bad for a company of Tesla’s stature, things could actually be worse – much worse. Considering the divisiveness of CEO Elon Musk’s political adventures, the company’s ongoing sales slump and the headwinds it faces in the form of tariffs, expiring tax credits and Chinese competition, Tesla’s current valuation actually looks ludicrously high.
With a market capitalization just over $1 trillion, Tesla is currently valued at almost 190 times its trailing-twelve-months earnings. To put that in perspective, $4-trillion juggernaut Nvidia, a company that many consider overvalued, has a TTM price-to-earnings ratio of 55, and Nvidia is at the very heart of the industry that will supposedly re-shape our lives for years to come. In the past four completed quarters, Nvidia’s revenue grew 86 percent – Tesla’s shrank 3 percent. Other tech companies like Apple and Meta have PE ratios of 33 and 28, respectively, while fellow car companies General Motors and BYD are valued at just 8 times their TTM earnings. All of these companies posted positive revenue growth over the past 12 months, Tesla didn’t.
Tesla’s current valuation is that of a company that's growing in the high double digits with a dominant market position in an industry with huge growth potential. And while Tesla may still be dominant in some markets, EV sales have slowed recently and the former undisputed market leader has lost some of its technological edge as legacy carmakers as well as Chinese companies like BYD have caught up. Add to that the fact that many Europeans (and Americans for that matter) have had enough of Musk and his erratic, often toxic behavior and Tesla’s valuation looks even more outlandish.