NVDA
NVIDIA
-- 140.110 RGTI
Rigetti Computing
-- 10.0400 TSLA
Tesla
-- 394.940 AMD
Advanced Micro Devices
-- 121.840 IONQ
IonQ Inc
-- 30.250 
What's a Fair Valuation for Tesla (TSLA) Today?
The purpose of sharing the 2 articles is to look at the various metrics used to analyse the valuation of Tesla stock.
1) Tesla PE Ratio
•Tesla's PE ratio as of December, 20: 115.36
A company's PE ratio is one of the most basic valuation metrics and a good jumping-off point for measuring the price of a company's stock relative to other companies. "PE" stands for "Price-to-earnings", and compares the current stock price to the company's earnings per outstanding share of stock.
PE ratio for Consumer Cyclic Companies as listed on market closed on December 20:
Tesla TSLA 115.36
Amazon AMZN 49.06
McDonalds MCD 25.70
Nike NKE 23.75
Starbucks SBUX 26.58
For a general assessment of whether a company may be over- or undervalued based on its PE ratio, it is generally compared to the average PE ratio in its industry. Tesla is categorized in the "Consumer Cyclical" category. Compared to other companies in this category, Tesla currently has a high PE ratio. World PE Ratio puts the average Consumer Cyclical company PE ratio at 27.85 as of December 20, 2024. Ultimately, the higher the PE ratio, the more short- to medium-term growth is being priced in by investors.
• Some analysts and investors, have argued that Tesla belongs in the "Tech" category, where PE ratios tend to be higher. For example, some large tech companies in the "Technology Companies" chart can be seen as having current PE ratios as high as 179. According to World PE Ratio, the average PE ratio for tech companies stands at 38.12.
PE ratio for Tech Companies as listed on market closed on December 20:
Nvidia NVDA 53.18
Apple $lAAPL 41.86
Broadcom AVGO 179.50
Advanced Micro Devices AMD 105.5
Palantir PLTR 402.75
2) Account for growth
• Tesla's estimated 12-month Forward PE: 115.36
In cases of high-expected growth, as it would seem investors are pricing in in Tesla’s case, a Forward PE ratio can also be used for more insight. This uses estimates of the company's earnings at a certain point in the future – usually 12 months – generally based on guidance statements made during company earnings calls. Yahoo Finance has Tesla's current Forward PE ratio at 115.36, but this metric may vary depending on the analyst's assumptions about future earnings. Just like the PE ratio, the Forward PE is a relative metric that may be compared to companies with common characteristics.
In cases of high-expected growth, as it would seem investors are pricing in in Tesla’s case, a Forward PE ratio can also be used for more insight. This uses estimates of the company's earnings at a certain point in the future – usually 12 months – generally based on guidance statements made during company earnings calls. Yahoo Finance has Tesla's current Forward PE ratio at 115.36, but this metric may vary depending on the analyst's assumptions about future earnings. Just like the PE ratio, the Forward PE is a relative metric that may be compared to companies with common characteristics.
•Tesla's estimated 5-year PEG ratio: 5.11
Similarly, the Price-to-earnings-growth, or PEG, ratio, can also be used for companies with high expected growth. This divides the PE ratio by the expected rate of earnings growth. Yahoo Finance currently has the PEG ratio at 5.11 with a five-year outlook, but this ratio may also vary depending on analyst expectations for earnings and timeline.
3) Conclusion
• Comparing Tesla's PEG ratio to that of similar companies may require more extensive due diligence on the investor or financial advisor's part as it requires assumptions about the growth rate of Tesla as well as other companies. In general, a lower PEG ratio indicates the potential for higher returns than companies with higher PEG ratios.
• Your personal risk tolerance and overall investment goals are also important to consider. A high PE ratio might indicate growth potential, appealing to some investors, but could be seen as overly speculative by others with different risk appetites.
Another consideration is Tesla being a highly volatile stocks may not be appropriate for all investors, as there may be sudden swings in either direction in these cases.
• Fundamental (FA)and technical analysis (TA) techniques come with their own sets of limitations. These valuation techniques are inherently backward-looking, relying on historical data which might not account for rapid shifts in technology, consumer preferences or management strategies. For instance, Tesla’s advancements in electric vehicle technology or autonomous driving might not be fully quantified by traditional financial metrics, highlighting the importance of qualitative factors.
4) Gary Black's views about Tesla value
• Gary Black, a prominent investor and the managing partner of the Future Fund LLC thinks Tesla could see significant growth from a new budget electric vehicle offering. He raised his price target for the EV maker by 27% to $380 from $300 on Monday. The revised target reflects Black’s confidence in Tesla’s long-term growth, using a PEG ratio of 1.75x and projected long-term EPS growth of 25%.
• Despite his optimistic outlook, Black recently expressed caution about Tesla’s current valuation, noting that the stock’s 50% rise since November’s election has been driven primarily by P/E expansion rather than earnings estimate revisions.
5) My Take
• The Tesla PE ratio has been high compared to the car industry average for the last 3 years. As of today, the Tesla share price is +76.7% in 3 months and +69.4% YTD. The bears have been using this metric to argue that the stock is overvalued for a long time. The metric is useless if a stock remains "overvalued" for such a long time. We need a new approach to estimate the value of Tesla.
• The recent extensive coverage of Tesla and Elon Musk (mostly positive) gives an impression that the stock "acts like a meme". Many are making a comparison of the stock rally with the one in 2021 for the bad and the good. This explains why someone is calling the rally as "pump and dump" and driven by "hype" while others said the soar is justified by strong potential growth and the positive catalysts.
• I shared Gary Black's view about Tesla because he has been under fire for trimming his Tesla's stake in November. His analysis can be considered more neutral and worth taking into consideration. Surely we cannot conclude Tesla value just based on one metric - the PE ratio.
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七爷 : tsla is not just a car maker!
ZnWC OP 七爷 : Your personal risk tolerance and overall investment goals are also important to consider. A high PE ratio might indicate growth potential, appealing to some investors, but could be seen as overly speculative by others with different risk appetites.
We have different risk levels. Others with higher risk appetite will think Tesla is a Tech company.
DoRaeMi : U know Yahoo, Reuters, Bloomberg are the democrats weapon against Tesla? Full of fake news. if u want to follow their valuations, just go ahead. I want to let u know if u want to compare a fair valuation, use palantir, Nvidia, Amazon and apple PE as the lowest guide.
And when u see Apple PE and Tesla is the same, u know that it is insanely undervalued.
Exactly : 600
ZnWC OP DoRaeMi : The sources of information for this post are not from Yahoo, Reuters or Bloomberg. And my posts are balanced with views from the media which are less hostile to Tesla. But I encourage you to read both the negative and positive views.
In short, this post looks at the PE ratio of Tesla as a car maker and a tech company. It also includes forward PE, PEG and analysis from a prominent investor, Gary Black.
I shared Gary Black's view about Tesla because he has been under fire for trimming his Tesla's stake in November. His analysis can be considered more neutral and worth taking into consideration.