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Tesla’s share price is ‘assuming incredible things’

Company’s $565bn valuation implies investors are already paying for the robotics and AI business ‘Musk wants everyone to start believing Tesla will become’

A Tesla charging station in California. Is the company's market value justified? Photograph: Philip Cheung/The New York Times

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Proinsias O'Mahony
Sat May 4 2024 - 06:00

Elon Musk says Tesla should be valued like an AI or robotics company, not an auto company, and the “biggest asset value appreciation in history” may follow when it masters unsupervised full self-driving. Bullish shareholders seemingly agree, with the stock lately rebounding strongly.

However, Albert Bridge Capital’s Drew Dickson is sceptical, writing in a recent Financial Times article that Tesla was already valued like a “pure AI and robotics company, even though it isn’t one yet” (82 per cent of revenues are still automotive).

In a follow-up discussion on X, Dickson notes analysts expect Tesla to do $2.56 (€2.38) in earnings per share in 2024.

A price-earnings ratio of 20 would mean Tesla’s core business is worth roughly $50 per share. A price-earnings ratio of 15 on earnings per share of $1.85 (Dickson’s estimate) means a share price closer to $30.

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Whichever you choose, you’re looking at a market capitalisation of either $175 billion or $95 billion. Tesla is valued at $565 billion, implying investors “are already paying $400 billion-$500 billion for the robotics and AI business that Musk wants everyone to start believing Tesla will become”.

Dickson is short Tesla in his personal account, but he is no perma-bear, having written positively about the stock in the past. His point is fair: valuation matters, and Tesla’s share price is “already assuming some incredible things”.

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