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Tesla (NASDAQ:TSLA) stock is trading very close to all-time highs. In many respects, the resurgence is phenomenal. Not only did boss Elon Musk have a very public falling out with US President Donald Trump, but the surging share price has come in spite of crazy valuation metrics.
Six months ago, US Commerce Secretary Harold Lutnick told several news outlets that Tesla stock would never be as cheap again. It was hovering around the $240 mark at the time. Despite all the above challenges, today it’s trading around $465 per share.
So, the big question is whether Tesla stock can really go higher from here. I put the question to ChatGPT, asking “where will Tesla shares be in one year?” The answer may surprise you.
Given the above, a reasonable base-case estimate might be that TSLA trades in the $300-$350 range in 12 months (assuming the current price is around $460). This would imply a moderate decline or sideways movement rather than a strong rally.
Breaking it down
ChatGPT said it arrived at this forecast because, in its words, “Tesla faces challenges including intensifying competition in EVs (especially in China and Europe), margin pressure, and delivery/growth expectations that may not fully satisfy bullish narratives”.
In other words, ChatGPT, leaning heavily on analysts’ sentiment, believes that competition from fast-moving Chinese and European manufacturers is eroding Tesla’s lead, while margins have tightened as price cuts continue to bite.
Investor expectations, meanwhile, may already be too high for the company to surpass easily.
It went on to note that “on the flip side, there are potential catalysts: scaling of newer businesses (robotics / autonomous driving), cost reduction, growth beyond autos (energy, services) could provide upside (share price growth) but these are longer-term and more speculative”.
So while ChatGPT recognises promising avenues for growth, it views them as future rather than immediate drivers of value.
Finally, it concluded that consensus targets cluster below current share price. This suggests, it argued, that the risk/reward is skewed towards a falling share price.
The bottom line
ChatGPT’s conclusion isn’t easy to disagree with. However, it does fail to fully appreciate the FOMO that many retail investors and even fund managers have with regards to this highly innovative company.
The stock now trades at 278 times forward earnings, which you’d have thought would be enough to dampen investors’ appetite. That simply hasn’t been the case so far.
Many investors are holding our for exponential earnings growth as we move towards an autonomous era for vehicles. But right now, the earnings forecast doesn’t show exponential growth.
The three-to-five year compound annual growth rate figure currently sits at 21.9% — this is based on forecast data. In turn, this gives us a price-to-earnings-to-growth (PEG) ratio of 12.7.
Clearly, there’s very little metric-based evidence that Tesla will go higher. And that’s why I don’t think it’s worth considering at this moment. That said, I do hope the company proves me wrong.
