Will Tesla Shares End Up on the Trash Heap of Broken Dreams?

Nothing can be worse for Tesla TSLA shares than when it’s treated like a mere car company, with investors fretting about declining sales, fierce competition, and the CEO’s antics turning off car buyers. While Elon Musk doesn’t want investors to think of Tesla as an automaker, ignoring the headlines is challenging.

Tesla's Valuation Is Based on Hype and Hope

The predicament for Tesla is that the stock has many characteristics investors currently shun. For starters, investors want valuation-supported stocks, yet TSLA doesn’t trade on reasonable valuation metrics for their current auto business — 80+ forward P/E with declining sales. The stock trades on the hype and hopes for future AI-related business ventures. 

Over the past year of stagnant sales, analysts’ earnings expectations for 2025 have plunged from over $8 per share to under $3 per share. General Motors GM is gaining EV market share and produces higher net income than TSLA, yet trades with a 4 P/E and about 6% of the market cap.

Headline Risk Is High

With a daily barrage of political news, investors are seeking opportunities without headline risk, yet Tesla’s CEO, Elon Musk, is a controversial tweet-maker and government-breaker. Not many investors want to feel the headline risk of protests, customer boycotts, and cringe-worthy tweets leading to falling sales.

Elon Musk Is a Part-Time CEO

Investors are in no mood for a CEO with split attention who thrives on hype. Musk touted in the last earnings conference call that TSLA could eventually have a larger market cap than the following five largest companies combined. The history of stocks where the CEO touted potential mind-boggling stock gains is a trash heap of broken dreams.

Dude, Where's My Self-Driving Car?

The shares are more sentiment-driven than any other large-cap stock: When the stock is flying high, the possibilities seem endless; and after the 50% pullback the investor concerns seem intractable. Either way, the shares live and die by Musk — and perhaps investors see what they want to see. 

Many see a hypester, playing on the hopes and dreams of investors willing to believe Tesla will own the future of autonomous cars that’s been promised regularly since 2016, including a million robotaxis by 2020. True Musk believers see a genius at work and are willing to overlook personal flaws for a ride along with the Steve Jobs/ Thomas Edison of our time. Period.

Dead Cat Bounce?

For now, TSLA is technically oversold, with an RSI below 30, after a complete round-tripped of its post-election rally. Nonetheless, finding reasons to be optimistic for a sustainable rally are elusive. 

The justification for the initial rally was thin, based on proximity to power and eased regulatory constraints. Perhaps investors are too myopically focused on the struggles in the EV business and overlooking the enormous opportunity in autonomous vehicles just over the horizon. Still, the current $750 billion market cap bakes in real success for robotaxis.

So Much is Riding on the Robotaxi

When Tesla’s robotaxis hit the streets, another round of hype will surely return. I wouldn’t want to be short when this long-awaiting moment finally arrives. However, failures and delays will be magnified, especially with a part-time CEO, subjecting investors to another rollercoaster. It’s the kind of stock ride only true believers can tolerate; the rest of us will gladly watch from the sidelines until there’s more of its boundless future in the present.

Trump Hearts Tesla

After President Trump touted buying a Tesla car at the White House, some stock excitement is natural, but this just makes TSLA a car company again. So, the idea that TSLA has gained the equivalent of a GM in market cap on this stunt doesn't seem like a lasting move.

At the time of publication, Gineson had no positions in any securities mentioned.