Tesla’s Lofty 200 P/E Could Mean More Upside

Key Points

• Tesla’s current price-to-earnings ratio sits near 200, well above auto industry norms.
• However, its valuation looks modest when compared to Tesla’s historical highs and future potential.
• Key signals, such as stronger sales, reduced political noise, and AI optimism, could justify further upside.

The price-to-earnings (P/E) ratio is one of the most widely used tools to evaluate a stock’s valuation and is quite easy to understand. It simply divides a company’s current share price by its earnings per share (EPS), providing insight into how richly or conservatively a company is being valued by the market.

For context, legacy automaker Ford Motor Co NYSE: F currently trades at a P/E ratio of just 8. By comparison, Tesla Inc NASDAQ: TSLA is sitting at nearly 200. At first glance, that sounds extreme, but context matters. Tesla isn’t just a car company. It’s part auto-manufacturer, part tech platform, part AI pioneer.

When viewed through that lens, today’s P/E may actually look modest compared to Tesla’s own past and what it could still become. Let’s jump in and take a look. 

The Tesla Multiplier

To be sure, Tesla’s current valuation is lofty by traditional standards, but it’s not unprecedented. In fact, less than five years ago, the company traded with a P/E ratio north of 1,100. Even trimming that number down to a fraction implies a 5x upside from today’s price levels.

That prior valuation was driven in part by ultra-low interest rates and euphoric tech sentiment. Still, Tesla is not without its tailwinds today, and there are early signs that it’s seeing another wave of bullish momentum.

The stock is up nearly 150% over little more than 12 months, with much of that rebound concentrated in the last six weeks as shares have recovered from a 55% haircut that started in December.

Since early April alone, Tesla has surged nearly 60%. Compare that to the 20% tacked on by the S&P 500 index, and you get a sense of just how favorably Tesla is being viewed by investors right now and what its bullish potential could be.  

Wedbush’s $500 Price Target on Tesla

This renewed confidence is best reflected in the recent Wedbush note, which gave Tesla a $500 price target, implying more than a 40% upside from current levels. Wedbush analyst Dan Ives called Tesla “the most undervalued AI play in the market today,” emphasizing its robotaxi platform and AI infrastructure as the next frontier for valuation growth.

Ives sees Tesla’s AI and autonomous potential as worth over $1 trillion alone and predicts a march toward a $2 trillion valuation by the end of 2026.

This bullish outlook has helped offset recent painful reputational and operational challenges. With the market and consumer sentiment turning against CEO Elon Musk’s involvement with the Trump administration this year, Tesla’s sales in Europe have slumped. At the same time, competition from Chinese brands like BYD has intensified. 

However, Elon Musk has said in recent weeks he’ll be stepping back from his government duties, which has been seen as a positive update. And there are signs of market stabilization. A fresh report from Monday, for example, showed Tesla’s sales in Norway jumped 213% year-over-year in May, driven by strong demand for the revamped Model Y. 

Sentiment Shift in Play for Tesla

As we head into the summer months, some are citing Tesla’s high valuation as a reason for caution, but for many investors, it’s a plus, not a risk. The fact that it has historically remained so elevated compared to its peers implies the market sees Tesla as a transformative company capable of disrupting not just the car industry but sectors as diverse as robotics, energy, and cloud computing.

That narrative is gaining traction again, with Musk recently sharing his vision of humanoid robots, autonomous vehicles, and vertically integrated AI platforms. The next real catalyst will likely be tied to Tesla’s expected robotaxi launch in a week. If Musk delivers on that front, and if regulatory tailwinds follow, a wave of capital could rotate into Tesla as a next-generation AI play rather than a mature EV stock.

If that happens, today’s P/E of 200 won’t seem high. It’ll look like the start of a new chapter.