$500 or $100: how a lot is Tesla inventory actually value in 2025?

Tesla (NASDAQ: TSLA) inventory has been on a wild journey lately. During the last 12 months, it has traded as little as $169 and as excessive as $488 (it’s at present again at $249).

The query is: how a lot is the inventory actually value? Let’s crunch the numbers.

Figuring out the true worth

There are a selection of the way to calculate a inventory’s true worth. One widespread technique is to make use of a reduced money movement (DCF) mannequin. This entails forecasting the corporate’s future money flows. These money flows are then discounted utilizing a sure rate of interest to acquire a gift worth and added collectively to acquire a inventory worth.

Growing a DCF for Tesla is just not simple although. For a begin, its money flows are extraordinarily risky (free money movement in 2024 was $1.02 per share in 2024 versus $2.17 per share in 2022). Secondly, this can be a disruptive expertise firm that’s engaged on a number of initiatives together with electrical automobiles (EVs), autonomous automobiles, battery storage, humanoid robots, and synthetic intelligence (AI). So its future money flows are very laborious to foretell.

Utilizing earnings per share

An easier method to receive an thought of a inventory’s true worth is to take a look at the corporate’s earnings per share (EPS) after which apply an earnings a number of to get a inventory worth. The earnings a number of is actually a price-to-earnings (P/E) ratio – probably the most widespread valuation instruments for shares.

This method has its flaws (figuring out the fitting earnings a number of to use is tough). However it may be a great place to begin, so let’s do it for Tesla.

The best worth

For 2025, the consensus analyst forecast for Tesla’s EPS is $2.68. This might not be correct however I’ll use this determine in my calculations.

Under, I’ve utilized 5 totally different earnings multiples to this EPS determine. For context, the median earnings a number of throughout the S&P 500 index is about 18 in the present day whereas the typical a number of throughout the ‘Magnificent 7’ is round 35 (this has been boosted by Tesla’s excessive valuation).

I believe Tesla deserves to commerce at a premium to the S&P 500. In any case, it has lots of long-term development potential on account of its publicity to AI and autonomous automobiles.

That mentioned, its EV enterprise is a little bit of a automotive crash in the intervening time (gross sales are plummeting worldwide on account of elevated competitors and attitudes to CEO Elon Musk). So, I’m not satisfied the inventory deserves a sky-high a number of.

For me, an earnings a number of of round 40 is about proper for this inventory. That’s over twice the US market common (and better than Nvidia, which is on 26).

That offers a inventory worth of $107. To my thoughts, that’s what Tesla inventory is de facto value in the present day. That’s somewhat over 50% beneath the present share worth. In different phrases, I see Tesla as overvalued at current.

It’s value noting that the EPS forecast for 2026 is $3.64. And making use of an earnings a number of of 40 to that takes us to $146. That’s a considerably greater worth however it’s nonetheless properly beneath the present inventory worth. So, I received’t be shopping for Tesla shares at present costs.