This coverage of Tesla was originally published on TheStreet Pro on Saturday, April 26th.
Last week was a big one for Tesla (TSLA) .
The company reported poor earnings, but the shares soared 18%. Investors are treating Tesla like a meme stock — it’s not now, nor has it ever, traded based on fundamentals.
And here’s the thing you need to know: This stock has been dead money for the past four years. It has underperformed the S&P 500 by 15 percentage points, caused investors to withstand significant volatility, and the company hasn’t launched a significant innovation since the Model Y midsize SUV in 2019.
I just don’t get why investors — better to call them speculators — are in love with this stock.
Tesla shares have been dead money since 2021
Tesla closed Friday at $285, a price it first hit in 2021. That’s smack dab in the middle of this stock’s monster trading range for the past four years.
I’m sorry, investors, you’d have done better and slept better in an index fund. Which, would probably offer exposure to Tesla, anyway. But those of you who are speculators are loving this volatility!
The shares more than doubled to an all-time-high of $488 following the election, when everybody thought that Chief Executive Elon Musk’s proximity to the new administration would reap benefits for the electric-vehicle manufacturer.
Following Donald Trump’s inauguration, the shares dropped to pre-election levels, losing as much as 48%, a round-trip for investors.
Proximity to Trump hasn’t worked in Tesla’s favor, and I see $300 as historic resistance.
What are investors thinking?
And at $300 the stock is wildly overvalued. According S&P CapitalIQ, the price-to-earnings multiple for the company is an insane 164 times. Price-to-sales is a little saner at 9.51 times, but remember that price-to-sales tells us how much we are currently paying per each dollar of sales (aka revenue). A normal number is around 2 or 3 times.
Scott McNealy, the former CEO of Sun Microsystems, offered sage wisdom to investors who were upset about losing money in his company’s shares following the dotcom bust. His words are just as relevant to Tesla investors today, given the aforementioned price-to-sales multiple of 9.51.
He said: “At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends.” He goes on to say that that’s impossible since it would require not paying employees or taxes.
He ends by saying to investors, “What were you thinking?”
That’s where we are today with Tesla. Lots of risk with uncertain reward.
According to Vitaliy Katsenelson, a money manager based in Denver, CO, only $100-$180b of Tesla’s $780b market cap (now $900b) is tied to the car business. The rest reflects Elon’s future dreams. That’s a lot to pay for ideas that may never come to fruition. It’s why I believe shareholders are speculators, rather than investors.
Look, it’s not a bad company. They’ve done more to advance EVs than any other company or government organization and have been incredible innovators.
I used to describe my own Tesla Model 3 as an iPhone on wheels.
But the company is in worse shape than it was before the election.
Before the election, headwinds included:
- Strong new competitive offerings from traditional car companies
- Lack of EV charging stations. Range anxiety is real.
- Lack of innovation at Tesla. The Model 3 basic sedan and Model Y midsize SUV are more than half a decade old, the Cybertruck is a flop, Full-Self-Driving is still in beta, and robotaxis are more like remotely driven taxis. And robots? Are you serious? I’d rather have a scary clown in my house.
- Tesla cars are not well built. Don’t agree? Body panels are falling off the Cybertrucks they were glued onto.
- Trust. Nobody trusts Tesla (or Elon) when they give a launch date or price. Robotaxis are years behind Alphabet’s GOOGL Waymo and one was driven remotely by a human at its unveiling last October. The Cybertruck was supposed to cost under $40,000.
- The Tesla board is anything but independent.
- AllianceBernstein reported in 2019 that executive turnover was incredibly high.
Since the election, it’s only gotten worse. In addition to all of the above, there’s also:
- Odometer manipulation scandal
- Canada rebate scandal
- People are exhausted by Elon
Is Elon Musk an asset or a liability?
Yes, the stock is up this week because Musk said that he’s going to spend more time at Tesla. Investors are excited to have Musk’s leadership back at the yoke.
Should they be?
According to a CNBC poll:
- 52% of Americans have a negative view of Musk, weaker than GM, the auto industry in general, and EVs.
- While 35% of the population is negative on EVs, 47% are negative on Tesla. Similarly, while 33% of Americans view EVs positively, only 27% view Tesla positively. That’s a big negative for the brand.
- Democrats, the company’s traditional purchasers and a group that overall is very positive on EVs, are significantly negative on Tesla.
- Republicans, while positive on Tesla, are net negative on EVs, making them unlikely purchasers.
So, Musk’s return to the company, while sounding great, will not boost sales of its passenger cars.
How to put Tesla sales back into Plaid mode
You know what would boost sales? Appealing new products that are an advancement over existing ones, look great, and offered at the right price points.
They’d have to be better than those offered by the enormous number of new competitors in the market, and that includes improved battery tech, where the Chinese have just announced a huge advantage over Tesla.
That’s an even bigger job now. Many potential consumers of the announced low-priced Tesla might just buy a higher-end used Tesla instead. There’s a glut of them on the market.
Or perhaps they’ll wait a year for the Bezos-backed Slate truck, which will cost around $20,000 and offer many options for customization. Teslas are pretty generic, with limited paint selections and options.
Who’s going to build those new products? Remember, the company is known for having high executive turnover. Some turnover is beneficial, but not at the expense of losing innovators. And why would a top quality executive want to work for such a volatile leader and company?
This may explain why Tesla hasn’t had a winner since 2019’s Model Y.
TheStreet reported that Ross Gerber, a longtime Tesla shareholder, believes Tesla would be better off if Musk simply stepped away. His polarizing tweets are killing the brand.
Leaving DOGE is a good start but it doesn’t change his tweeting garbage daily. The tesla brand is severely tainted at this point. Damage is done. $TSLA
— Ross Gerber (@GerberKawasaki) April 2, 2025
I agree. But it’s not that easy. Musk is synonymous with Tesla. He is also the company’s largest shareholder, owning 12% of the company, according to S&P CapitalIQ. People who are disillusioned with Musk are unlikely to want to further enrich him.
Musk needs to do more than just step down. He needs to liquidate his holdings for the good of the company. Yes, that would pressure the shares, but Musk’s 410 million shares could be absorbed within one week’s current trading volume.
I’d be a buyer!
Tesla desperately needs a win. They need to innovate. Fart sounds and tweets won’t do it. The company needs people who can catch a rocket, like the engineers at Musk’s venture, SpaceX.
Without that win, Tesla remains horribly overvalued. I wouldn’t recommend shorting a stock like this, unless you’re a trader. Speculators could easily bid shares over $300 in the short run. But in a recession, the shares could easily fall back to $150 or even $100. At those levels, based on current fundamentals, the p/e multiple would still be frothy but the price-to-sales would be more in line with the mature company that Tesla could become.
Summary
While speculators are giddy to see the leader of DOGE dart back to his roots, Tesla’s customers are simply exhausted by Elon.
Additionally, Tesla has not been kind to shareholders, who would’ve been better off in an index fund. I don’t see that changing without new leadership. The risk is that the shares could fall to as low as $100. Remember that the last two trips over $300 eventually disappointed investors.
Maybe it’s time for Elon Musk to give another executive a chance to shine and get Tesla out of the DOGE-house.
