A decade ago, a £100,000 investment in Tesla (NASDAQ: TSLA) would have turned into approximately £2.4 million today, reflecting a staggering 2,340% increase in share price. However, when factoring in the 20% depreciation of the pound over the same period, that initial investment would have equated to $150,000 back then, which today would be worth around $3.5 million, or £2.7 million.
This incredible rise, however, has been anything but smooth. Tesla shares plummeted 30% earlier this year from their December peak of $488.54, adding to concerns about the company’s valuation, financial metrics, and leadership direction.
Is Tesla Overvalued?
Tesla continues to defy conventional valuation metrics. With a trailing price-to-earnings (P/E) ratio of 147, the stock trades at an 860% premium to the industrials sector median. Even its forward price-to-earnings-to-growth (PEG) ratio of 8.5 represents a massive 450% premium compared to sector averages. Such metrics raise serious concerns about whether Tesla’s stock price is sustainable in the long term.
Unlike traditional automakers, Tesla’s valuation is based less on its car sales and more on its potential in self-driving technology and robotics. However, many investors are questioning whether these growth narratives are enough to justify its sky-high valuation.
The Musk Factor: Too Many Roles, Not Enough Focus?
Tesla’s meteoric rise is inseparable from Elon Musk’s leadership, but his growing portfolio of responsibilities is raising red flags. Musk, who currently juggles roles as Tesla CEO, SpaceX head, and the Trump administration’s Department of Government Efficiency (DOGE) chief, has divided his attention across multiple ventures. Investors worry that Tesla may be losing its edge as a result.
Moreover, Musk’s involvement in politics has caused ripples across the investor community. Recent policy changes, including the U.S. government’s cancellation of a $5 billion EV charging initiative and the imposition of new 25% steel and aluminum tariffs, have complicated Tesla’s China-dependent supply chain. These shifts could directly impact production costs and profitability.
Brand Erosion and Consumer Sentiment Decline
Tesla’s success was once fueled by a loyal consumer base and a cult-like following for Musk. However, recent consumer sentiment surveys paint a different picture. According to Morning Consult, Musk’s favorability rating plummeted to 3% in early 2025, a stark contrast to the 33% he enjoyed in 2018. This decline has coincided with weaker Tesla sales, particularly in key European markets.
For instance, Financial Times data indicates Tesla’s January sales in France dropped by 63.4%, while German sales also tumbled. Some attribute these declines to Musk’s political stances, including his public support for Germany’s right-wing AFD party, which has alienated portions of Tesla’s European customer base.
Will Self-Driving and Robotics Justify Tesla’s Valuation?
Tesla’s long-term value proposition hinges on its ability to dominate the self-driving and robotics sectors. While Musk envisions Tesla as a leader in these emerging industries, publicized advancements have been scarce. Investors are left questioning whether Tesla’s future will live up to expectations or if the company is losing ground to competitors.
Despite its vast cash reserves and ambitious goals, the lack of tangible progress in these areas fuels uncertainty. For some, this makes Tesla an attractive long-term growth story. For others, it raises concerns that the stock’s valuation is increasingly detached from its fundamentals.
With Tesla’s stock at a crossroads, investors face a crucial decision: stay for the ride or take profits while valuations remain high? The coming months will be pivotal in determining whether Tesla maintains its dominance or if cracks in its foundation begin to show.
