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this post was submitted on 18 Mar 2025
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The P/E ratio is off the charts. Things will get really interesting after the Q1 earnings call on April 29th.
I wouldn't be surprised if Tesla chooses to cook the books.
It will be very strange if numbers aren't in red.
Oh man, that would be so illegal! The SEC would surely step in to investigate that, right?
Right?
...right...?
We have looked at several book covers, and everything seems fine.
They are already cooking the books: https://motorillustrated.com/suspicious-tesla-sales-surge-triggers-canadian-government-investigation/149947/
Yes that's a very weird story, I'm looking forward to hear what the investigation reveals.
Spoiler alert: it will only reveal that the US no longer honors extradition treaties.
Can you imagine what would happen if fElon visited Canada and the arrested him?
I’d like to imagine the good parts (Canada holding him accountable), and not the insane fascist parts (whatever stupid or dangerous threats our Cheeto Mussolini would make).
They might pull an Oracle and stop reporting certain numbers and aggregate them with something else. Like when oracle stopped reporting cloud revenue as it's own line item.
https://www.financecharts.com/compare/TSLA,TM/value/pe-ratio
So uh... Toyota's PE is almost 8, a bit down from its historical average of about 9 or 10.
Tesla's is currently about 115.
Down almost 50% from its highs around 200 during Jan 2025.
If Tesla's actual $$$ stock/share value dropped down to ... lets say a PE of 10... that would be... well ok it is currently still dropping rather rapidly, but lets say rightnnow its $225 per share.
If Tesla 'corrected' to a PE of 10, that's a share value of about $19.57.
About a 91% drop from where it is right now...
... which would wipe out around $700 billion of market cap.
These are ballpark figures based on a hypothetical scenario, this is not financial advice, but yeah, that is a way of looking at how overvalued Tesla is (or could be).
EDIT: Musk himself apparently owns about 410 million Tesla shares, as of Feb 2025.
https://www.investopedia.com/articles/insights/052616/top-4-tesla-shareholders-tsla.asp
So... a 91% reduction of 410m shares * $225 per share...
That would be a personal loss for Musk of about $82 billion, from this exact moment.
That'd put his net worth at about $273b, based on him having a net worth of $355b as of Feb 2025... but his net worth may already be significantly less than $355b, because Tesla has dropped a lot between the date of the source I've found for his net worth, and right now.
EDIT 2
https://www.forbes.com/profile/elon-musk/?list=rtb%2F&sh=7123ba5d7999
Uh wow yeah, ok, between Feb 28 2025 and Mar 18 2025, he's already lost about $34 billion... and is currently at $321 billion.
So... if you take $82 b out of $321, then he's down to around $240 ish.
Sadly... he would be the richest person in the world, even after that, he'd have to get below $210b ish to sink to #2 under Bezos, below about $200b to be #3, also under Zucky boy.
And all this is without even taking into account the fall of the Earnings side of the P/E.
If Tesla sales keep falling that "correct" P/E or 10 won't be $19.57, it will be a lower number that keeps on falling along with the fall in sales because less sales means less earnings.
Even better: like all automakers Tesla has a lot of fixed capital costs which can't be easily shrinked (factories, equipment) so the fall in sales might actually push them below profitability since they will only be able to reduce costs in the short and mid term up to a point (it take time to sell a factory and the equipment in it)
If the company becomes unprofitable, it will need money from outside to keep going, and in an environment of quickly falling share prices that money is not going to come from outside investors and getting it from lenders using Tesla's own stock as collateral will be very difficult if not impossible.
A fast enough fall in sales right alongside a steep fall in stock price could bankrupt Tesla.
Oh, oh, I know this one! The answer is "a government bailout!"
Correct!
My hypothetical is greatly oversimplified... in a way that is arguably optimistic.
All very good other points to add... I've got a slowly healing but fucked up wrist/hand, so I can only type so much.
For someone who knows nothing about stocks, what is a P/E ratio?
The price the market is willing to pay for one share of stock vs the amount of profit the company is making per share.
A P/E of 90 means someone is willing to pay $90 for a share of a company that is netting $1 of profit for each outstanding share it has.
In terms of Tesla.
So, let's be incredibly generous and say that Tesla should have a P/E ratio that's similar to a well run auto company, like 7. For it to have that P/E ratio, its stock price should be about $14 per share, not $228. If Tesla lost 94% of its value, it would have a P/E ratio similar to a well-run car company that made good cars with an anonymous CEO that nobody hates.
But, just pretend it's a tech company, not a car company. (Bullshit, obviously, but just pretend.) It is still overvalued by a factor of 4-5 compared to other big tech companies.
Somebody's going to make mountains of money shorting Tesla stock. The problem is that markets can remain irrational longer than most people can remain solvent.
And to add onto this, very high P/E ratios can often indicate a stock is artificially overvalued. Typical p/e's on the DJIA average out to around 20, and most companies will have P/E's between 5 to 30... a P/E of 90 indicates a huge, huge value bubble.
https://en.wikipedia.org/wiki/Price%E2%80%93earnings_ratio
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