Tesla Stock Analysis: Cheaper but Still Overvalued

Tesla's stock has dropped 30% this year, with its price-to-sales ratio falling from over 15 to 9.2. Despite the decline, valuations remain above long-term averages, questioning whether the stock is a good buy for investors.

Date: 25-04-2025

AI Rating: 6

Valuation Analysis of Tesla's Stock

Tesla's significant drop of around 30% year-to-date has caught the attention of investors, particularly due to its price-to-sales ratio decline from over 15 to 9.2. However, a deeper examination reveals essential insights about its valuation and potential future performance.

Despite the recent correction, Tesla's price-to-sales (P/S) multiple remains elevated compared to historical ranges, which have generally varied between 5 and 10 times sales. The surge to more than 16 times sales seen in late 2024 necessitated a correction, bringing it back towards historical norms, yet it still hovers above these long-term averages. This suggests that although the stock has become technically cheaper following its decline, it may not be as enticing as it initially appears.

Moreover, Tesla's long-term growth forecast is optimistic, but investors should be aware that the forward P/S multiple continues to reflect a valuation that exceeds the norm, driven by expectations rather than concrete financial performance metrics.

In summary, while the stock's correction may indicate an opportunity for entry, the pricing metrics imply that Tesla is navigating back to a valuation that, while appearing more favorable, might still be overstated when compared to its operational growth and historical performance.

Stocks: TSLA