Tesla's stock price breaks through historical highs; can it continue to write its legend in the future?

LB Select
2024.12.12 09:36
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Tesla (TSLA.O) stock price has finally refreshed its historical high after 1,133 days. On Wednesday, Tesla's stock closed at $424.77, surpassing the adjusted historical high of $409.97 set on November 4, 2021. The intraday high on that day reached $424.88, also exceeding the previous intraday high of $414.50 set earlier that same day. This wave of increase has astonished investors and Wall Street. Since the election on November 5, Tesla's stock price has risen by about 69%, equivalent to an increase of $173 per share, with the company's market value increasing by approximately $555 billion. At the same time, Wall Street analysts have also raised their average target price by about $40, clearly trying to catch up with this surge. Tesla's market value currently exceeds $1.3 trillion, more than $100 billion higher than the peak in 2021. (Tesla's market value surpassed the 2021 peak on Tuesday. The number of shares outstanding is about 150 million more than at that time.) These figures are astonishing, but the following data is not so optimistic. In the year following the 2021 peak, Tesla's stock price performed poorly. Three months later, the stock price fell from about $410 to $291, a decline of about 28%. A year later, the stock price further dropped to $207, a decline of nearly 50%. This is indeed concerning, but there are other indicators worth referencing. Currently, Tesla's stock price is about 125 times the expected earnings for 2025

Tesla (TSLA.O) stock price has finally refreshed its historical high after 1,133 days.

On Wednesday, Tesla's stock closed at $424.77, surpassing the adjusted historical high of $409.97 set on November 4, 2021. The intraday high reached $424.88 that day, also exceeding the previous intraday high of $414.50 set earlier that same day.

This wave of increase has astonished investors and Wall Street. Since the election on November 5, Tesla's stock price has risen by about 69%, equivalent to an increase of $173 per share, and the company's market value has increased by about $555 billion. At the same time, Wall Street analysts have also raised their average target price by about $40, clearly trying to catch up with this surge.

Tesla's market value currently exceeds $1.3 trillion, more than $100 billion higher than the peak in 2021. (Tesla's market value surpassed the 2021 peak on Tuesday. The number of shares outstanding is about 150 million more than at that time.)

These figures are impressive, but the following data is not so optimistic. In the year following the 2021 peak, Tesla's stock price performed poorly. Three months later, the stock price fell from about $410 to $291, a decline of about 28%. A year later, the stock price further dropped to $207, a decline of nearly 50%.

This is indeed concerning, but there are other indicators worth referencing. Currently, Tesla's stock price is about 125 times the expected earnings for 2025. Historically, Tesla has reached similar valuation levels multiple times, such as in January 2022, January 2021, and several periods in 2020.

The performance after January 2022 is very similar to that after the November 2021 peak. A year later, the stock price fell by about two-thirds.

However, in 2020 and 2021, when the stock price reached high valuation multiples, the performance was quite good. Tesla's stock price rose over 740% in 2020 and another 50% in 2021.

Tesla's price-to-earnings ratio at the beginning of 2022 reached about 145 times that year's earnings. Gary Black, co-founder of Future Fund Active ETF and a Tesla shareholder, pointed out that based on his estimate of adjusted earnings of $3.30 for 2025, and a similar price-to-earnings ratio, Tesla's stock price could be close to $480. If Tesla's planned low-cost new model sells well in 2025, his estimate of $3.30 may be too low"I'm not saying that Tesla should reach that level," Black added. "But if you believe that 'driverless technology anytime, anywhere' is about to be realized, and only Tesla can deliver this technology, then this price-to-earnings ratio 'isn't crazy.'"

In addition to new models, Tesla plans to launch a driverless robotaxi service by the end of 2025.

The analysis results related to the price-to-earnings ratio are mixed. These data do not guarantee whether Tesla stock will rise or fall in the coming months. Each scenario has its uniqueness.

The stock performance of Tesla in 2022 was influenced by CEO Elon Musk's acquisition of Twitter (now X). At the same time, although Tesla saw rapid delivery growth in 2022 and 2023, electric vehicle prices began to decline due to rising interest rates and increased competition. At the beginning of 2022, shortly after a record closing price, Wall Street had expected Tesla to achieve an earnings per share of about $5 in 2023, but ultimately only realized slightly over $3 in earnings. The environment has become more challenging.

Earnings and earnings expectations have always been key factors driving stock prices and are also other important considerations for investors. Currently, the market expects Tesla to have an earnings per share of about $4.25 in 2026.

This change in expectations could become a key influencing factor for Tesla stock trends in 2025. Tesla’s low-priced new models and robotaxi service plans could both serve as strong drivers to boost expectations.

If expectations rise, investors will still need to decide how much valuation they should pay for Tesla’s earnings. This debate will never cease.

Source: Jin Shi Data

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