Is Tesla (NASDAQ:TSLA) inventory undervalued? Properly, it’s onerous to argue that any firm buying and selling at 100 instances ahead earnings is undervalued. In truth, a lot of the charts would reinforce that. The inventory is exceedingly costly.

Right here’s what the charts say

Beginning with the price-to-sales (P/S) ratio, we are able to see that Tesla has been dearer, and it’s additionally been cheaper over the previous 5 years. As the info highlights, Tesla is at the moment buying and selling round 33% above its lowest P/S ratio throughout the interval. Nonetheless, the low cost versus 2021 ranges is big.

The price-to-earnings (P/E) ratio reveals an identical image. Firstly, we are able to see that at 124 instances trailing earnings, it’s extremely costly for a automobile inventory. Nonetheless, it has been considerably dearer than it’s at present.

What’s extra, the anticipated earnings development charge from right here does little to fulfill this valuation. Analysts count on earnings to develop by round 11.5% yearly over the medium time period. That’s slower than sometimes ‘boring’ British firms like Lloyds. The result’s a P/E-to-growth (PEG) ratio of eight. For context, truthful worth is taken into account to be one and below.

All of this implies Tesla inventory ought to collapse.

A multi-trillion greenback promise

So, why is Tesla so costly? Properly, Elon Musk has repeatedly asserted that Tesla might develop into essentially the most priceless firm on this planet, even surpassing the mixed market capitalisation of at present’s 5 largest companies. Collectively, these firms are price round $11trn. Musk’s imaginative and prescient hinges on transformative applied sciences past electrical automobiles and into autonomous robotaxis and humanoid robots.

Tesla’s future is centred on full self-driving automobiles and the creation of an enormous robotaxi fleet. This ride-hailing community might function across the clock, producing steady income and probably disrupting each the automotive and transportation sectors. Analysts resembling ARK Funding Administration’s Cathie Wooden estimate the robotaxi alternative alone could possibly be price up to $14trn by 2027.

As well as, these robotaxis might, in concept, promote their unused computing energy to the broader market when not in operation. In spite of everything, these automobiles would require among the most superior computing expertise round. “So if you can imagine the future, perhaps where there’s a fleet of 100m Teslas, and on average, they’ve got like maybe a kilowatt of inference compute. That’s 100 gigawatts of inference compute distributed all around the world”, Musk mentioned in 2024.

Musk can be betting on Tesla Optimus, a humanoid robotic he claims might ultimately outpace the automobile enterprise in worth. He envisions hundreds of thousands of those robots produced yearly, serving in factories and houses, and forecasts that Optimus might generate over $10trn in income as adoption scales. These robots would additionally play an essential function in his plan to colonise Mars.

Nonetheless, coming again down to earth with a bang, there are big execution dangers. Tesla is behind a few of its robotaxi friends and Optimus has but to actually seize the creativeness of the investor. I need to see Tesla proceed to push technological boundaries, however I can’t put my cash behind it but.