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Love him or hate him, you can’t ignore Tesla (NASDAQ: TSLA) boss Elon Musk — and it might be a mistake to write off the stock.
As global electric vehicle sales stalled, investors fearing the worst dumped Tesla. And the share price slumped to a 2025 low of just $214 in April — for a 45% fall since the start of the year.
But it’s come storming back. By close Tuesday (16 September), Tesla stock was up at $422. That’s enough to turn £10,000 invested at the bottom into a bit over £19,700 today. And it’s thanks to one major stock buyer — Elon Musk, himself.
Can you spare a billion?
Musk invested nearly $1bn buying Tesla shares in the range of around $372 to $396 apiece. So he’s already in profit. And after having had a miserable year so far, Tesla stock is up 4.4% year to date at the time of writing.
Musk’s move might have got things back on track, at least for now. And he’s helped make a fat profit for anyone who managed to time the year’s low just right. But there’s one thing he hasn’t changed — Tesla’s sky-high valuation, which is still enough to make my eyes water.
We’re looking at a forecast price-to-earnings (P/E) ratio of 285 now — pushed up by Musk’s buying spree. No other Magnificent Seven tech stock comes close. Nvidia, with a market cap above $4.2bn, is on a far lower multiple of only 40 — and that’s the most highly valued of the other six.
Long-term future
A big show of confidence from a CEO is always welcome. But it really doesn’t seem to be justified by profit expectations for the next few years. City analysts expect earnings per share to grow 50% between 2024 and 2027. But that would drop the P/E only as far as 135 — still stratospheric even by today’s tech stock standards.
Now, that’s not what the lofty Tesla valuation is all about, of course. It’s about hoped-for domination of the self-driving and robotaxi market. And about leading the world in robotics and related AI fields in the longer term.
But those are fiercely competitive businesses with some of the world’s best tech people working in them. And I think back to something ace investor Warren Buffett reminded us of some years ago. When aviation was the most exciting new techology around, it wasn’t the early pioneers that made all the money.
Vision, or fantasy
It was said that Apple‘s Steve Jobs had a ‘reality distortion field’ he used to convince himself, and others, of what was possible. I wonder if Elon Musk might be taking the concept to a new level? For a hugely motivated business driver, I find it hard to fault him. But as someone to take investment advice from? I’m not so sure.
Those who do share his vision might want to consider following his lead and buying. But I also think it’s worth considering holding off for a bit to see what the next two or three years could bring. That’s what I’m doing.
