Investors are betting CEO Elon Musk can transform the electric vehicle maker into a robotaxi and humanoid robot giant
There’s a question that’s sparked countless debates among finance professors, analysts and investors, as well as heated arguments on social media: How much is Tesla Inc. worth? While some see the firm’s $1 trillion market capitalization as justified, others contend that valuation is divorced from reality.
Putting a number on Tesla’s worth depends on how you define the company: as a leading electric vehicle maker or a technology business that could one day revolutionize self-driving capabilities and the field of humanoid robots.
Nicholas Colas, co-founder of DataTrek Research, estimates that Tesla’s share price today is based almost entirely on those future endeavors. Wall Street is split on the path ahead. The range of analysts’ 12-month price targets for the stock is among the widest in the S&P 500 — from $115 per share toward the lower end to as high as $500, according to data compiled by Bloomberg in early June. In other words, it’s the difference between Tesla being valued at $370 billion versus $1.6 trillion in a year’s time.
There’s another factor at play here, too: Elon Musk. It’s hard to think of another chief executive officer in modern history who has had as much influence over their company’s stock price as Musk — perhaps not even Berkshire Hathaway Inc.’s Warren Buffett.
Belief in Tesla’s potential as a tech disruptor is being driven by Musk’s assurances that the future of the firm lies not in automaking but automation. That faith will be put to the test when Tesla finally rolls out its long-awaited robotaxi service. Musk said that a launch was “tentatively” scheduled for June 22 in Austin. It looks likely to feature a small fleet of the company’s Model Y vehicles.
Musk’s vision has gathered a cult-like following among investors, but his influence has worked in the opposite direction too, as damage to his personal brand from his MAGA entanglements and an acrimonious fallout with US President Donald Trump tarnished Tesla in recent months.
Tesla the car company
Tesla is best known for being an EV pioneer, bringing battery-powered vehicles into the mainstream. Its lineup of electric cars and trucks was responsible for almost 80% of the firm’s revenue generated last year. The rest of the company’s sales were split roughly evenly between its services segment, which includes its network of EV chargers, and its solar and energy storage products.
EVs Drive Tesla’s Revenue at Present
Almost 80% of the company’s revenue in 2024 came from vehicle sales and leasing, as well as selling regulatory credits to other automakers
Who are Tesla’s carmaking peers?
Tesla has very few true peers in the automotive industry. There’s no other EV maker of the same size, although China’s BYD Co. — which sells plug-in hybrids as well as battery-electric vehicles — is catching up fast. BYD sold more battery-powered EVs in Europe than Tesla for the first time ever in April, in what could be a watershed moment for the EV market. Some analysts are predicting that the Chinese auto manufacturer could outpace Tesla globally for the full year.
When compared with legacy carmakers, Tesla is of a middling size. It sold just under 1.8 million vehicles across the world last year, equivalent to less than a third of General Motors Co.’s sales and less than half of Ford Motor Co.’s.
Analysts estimate Tesla’s sales will drop slightly this year to around 1.7 million vehicles. That reflects a number of headwinds for the company: the pausing of production to retool assembly lines for the redesigned Model Y, lower sales in Europe and the US amid backlash to Musk’s political activities, and increased competition in China from local brands.
The profit margin from Tesla’s auto division, once a source of envy in the industry, is expected to be about 17% this year, also down from 2024 and closer to what GM and Ford make on their car businesses. That’s even with the big bump to Tesla’s margin from selling zero-emission credits to other automakers. It receives such credits as part of government policies encouraging the adoption of cleaner vehicles, although this revenue stream could come under pressure in the US as the Trump administration looks to loosen fuel-economy and tailpipe-emissions standards.
And yet, when combined with slowing growth, the potential nixing of EV tax credits in the US, and a narrow and dated vehicle lineup — the affordable car that Musk has been promising since his first “Master Plan” in 2006 has yet to materialize — Tesla’s market cap is still more than 10 times higher than both the Detroit stalwarts’ put together.
When looking at their forward price-to-earnings ratios — a common valuation metric that compares a company’s share price with its estimated earnings over the next 12 months — Tesla is currently trading at a multiple of around 138 versus mid-to-high single digits for GM and Ford.
Tesla’s Forward Price-to-Earnings Ratio Towers Over GM and Ford
The EV maker’s shares trade at levels that are unusual for the auto industry
How do analysts value Tesla’s auto business?
While Tesla stands out in terms of its focus on an electric drivetrain, it’s still fundamentally in the capital-intensive business of making and selling cars, just like a conventional automaker.
“The traditional carmakers are easier to value, they have very visible earnings and revenue streams,” said Steve Man, an automotive analyst at Bloomberg Intelligence. “How different analysts value them really only depends on their expectation for the overall auto market.”
Wells Fargo & Co.’s Colin Langan is a bearish voice on Tesla among Wall Street analysts. His $120 per share price target is based on a $65 per share valuation for the core business — EVs and energy. By contrast, Morgan Stanley analyst Adam Jonas, a long-time Tesla bull, puts the value of the EV division at $75 a share in his base case, feeding into a price target of $410. He accounts for the possibility of a continuing stream of future revenue from Tesla’s cars by way of self-driving technology, charging and data connectivity services, among other things.
“Most investors value Tesla’s core auto business at between $50 and $100/share. Then they put their pens down,” Jonas wrote in a note to clients in mid-May. “Stopping here is akin to valuing Amazon as solely an online retailer or Apple as a seller of glowing rectangles and earbuds.”
Many retail investors, an ardent fan base for Tesla, would agree. For Herbert Ong, an individual investor who runs a Tesla-focused YouTube channel with more than 100,000 subscribers, the car business is really a sideshow.
A self-described long-term Tesla bull who interviews auto industry experts, Wall Street veterans and other retail investors on his channel, Ong says Tesla’s true value lies in self-driving cars. His comments echo those from Musk last year that “if somebody doesn’t believe Tesla is going to solve autonomy, I think they should not be an investor in the company.”
How Analysts Calculate Tesla’s Value
Robotaxis rather than EVs are driving the higher price targets
Source: Analyst research reports
Note: *JPMorgan doesn’t break out the potential value of each business unit; Morgan Stanley’s target also includes $17 per share from Tesla as a third-party EV powertrain and battery supplier; RBC’s target is as of April 22, 2025.
Tesla the tech disruptor
Beyond Tesla’s revenue-generating operations are the technologies that have yet to make it past the prototype stage, let alone prove themselves at scale: fully autonomous vehicles and a two-legged robot called Optimus that the firm says is capable of performing “unsafe, repetitive or boring tasks.”
Tesla has developed what it calls Full Self-Driving software — a misnomer as FSD is actually an advanced driver-assistance platform that requires human supervision, rather than a fully autonomous system. The tech relies on cameras to serve as the eyes of the car instead of lidar or radar, which Musk says is cheaper and easier to scale.
But critics argue this is a riskier approach to vehicle autonomy that could struggle with weather conditions that reduce visibility, like fog or glare from the sun. The US National Highway Traffic Safety Administration is investigating whether the human-supervised FSD is defective after a number of serious crashes.
Against that backdrop, Tesla has been trying to evolve its FSD into a system capable of operating different types of vehicles without human oversight. The ambition is for this to power an autonomous ride-hailing network that initially uses Tesla’s consumer models before incorporating a purpose-built vehicle called Cybercab, which will have no steering wheel or pedals.
Teslas Use Fewer Sensors to See Their Surroundings
Waymo relies on radar and lidar in addition to cameras
Source: Illustration by Chris Philpot; BloombergNEF
Note: Diagram represents sensor placement, not number. In-car camera and ultrasonic sensors not included. Tesla Model 3 is reflective of Hardware Version 3.
Who are Tesla’s tech peers?
For those who argue Tesla isn’t really an auto company — at least not in the traditional sense — its inclusion in the “Magnificent Seven” is seen as validation of the firm’s tech credentials. This group is made up of six conventional tech giants — Alphabet Inc., Amazon.com Inc., Apple Inc., Meta Platforms Inc., Microsoft Corp. and Nvidia Corp. — and Tesla.
Tesla is the most expensive stock of the bunch with its triple-digit forward P/E ratio. The next closest is Microsoft but it’s a distant second, trading at around 32 times forward earnings.
Tesla Is the Most Expensive Mega-Cap by a Long Shot
Its price-to-earnings ratio beats all other Magnificent Seven stocks
Source: Bloomberg
Note: As of June 18, 2025.
Tesla’s claim to membership in this club rests on its reputation as a tech disruptor. As its EV business slowly loses its competitive edge, the onus of innovation has moved to the company’s other ambitious ventures.
When it comes to self-driving, Tesla’s biggest and most credible rival is Alphabet’s robotaxi unit, Waymo, which is already operating in four US cities and providing over 250,000 paid rides per week using a fleet of more than 1,500 cars. They’re not straightforward peers. Waymo is primarily a software company and doesn’t build its own vehicles, instead modifying electric Jaguar I-PACEs.
There’s a marked difference in the valuation of the two companies. Waymo, nestled within the larger Alphabet conglomerate, was valued at around $45 billion after a funding round in October.
How do analysts value Tesla’s tech businesses?
Calculations by Colas, a 30-year Wall Street veteran who spent more than a decade covering the auto industry, show that about 95% of Tesla’s share price is tied to what the company might do in the future.
The math he uses is simple enough. Tesla is estimated to earn about $2 a share this year. Assuming this current earnings power remains stable and doesn’t decline in the future, he estimates the value of that stream of cash flow to be $20 a share in Tesla’s current stock price. The rest — Tesla closed at just over $322 on June 20 — reflects what the firm could achieve in the years ahead.
As the robotaxi and robot segments don’t generate any revenue yet, valuing these futuristic businesses is arguably more art than science. Analysts’ assumptions of future growth are based on their perception of Tesla’s developing technical prowess rather than past performance.
Faced with the challenge of assessing unproven but potentially massive tech in a space with few real competitors, most Wall Street sell-side analysts approach this valuation exercise in the spirit of a venture capitalist.
VC investors, who often fund startups or young businesses that don’t have a steady income, look at the size of the market the company’s product will be sold in, make an informed guess on where the profits will be in a few years, look at comparable publicly traded firms, and come up with a potential valuation. It’s a fine balance that runs the risks of being overly speculative.
Morgan Stanley’s Jonas estimates Tesla’s ride-sharing and related services are together worth about $250 per share, but he attaches no value to the humanoid robots business. Tom Narayan at RBC Capital Markets has a similar view of Tesla’s full-self driving and robotaxi businesses, valuing them at $233 per share in total. But he ascribes close to $5 per share to the robots. Stifel’s Stephen Gengaro is even more bullish, modeling $311 per share from full-self driving and robotaxis, and $29 per share from Optimus.
The Musk factor
Analysts’ models don’t have a separate line item accounting for Musk’s impact on Tesla’s valuation. Bloomberg Intelligence’s Man says the Musk factor is reflected in the gap between the odds of success that bullish and bearish analysts ascribe to different parts of the business.
Those with higher price targets seem more optimistic about the outlook for Tesla’s autonomous vehicles, estimating that they comprise the largest chunk of the company’s value. This comes as Musk pretty much staked the future of his firm on self-driving cars in 2022, saying that solving this tech challenge is “really the difference between Tesla being worth a lot of money or worth basically zero.”
He’s been signaling for more than a decade that Teslas are on the verge of being able to operate with full autonomy, at one point even calling himself “the boy who cried FSD.” There’s plenty of skepticism around whether the upcoming launch of the company’s autonomous ride-sharing service will be the long-awaited breakout moment and live up to Musk’s hype.
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But Musk has succeeded in building up a lot of goodwill to persuade analysts and investors to look beyond near-term failings and broken promises. After all, he’s overseen technological changes that once stretched the imagination, such as dragging the more than century-old auto industry into the electric age or making the vertical landing of reusable space rockets a routine affair.
Musk has set the bar for Tesla’s robotics endeavor even higher, saying that in the long term, Optimus could generate more than $10 trillion of revenue — over 100 times the firm’s current annual sales — and “overwhelmingly [be] the value of the company.”
It’s a lofty ambition to ask investors to buy into, particularly given that prototypes of Optimus turned out to be operated remotely by humans in a demonstration last year. But short sellers can attest to the perils of betting against Musk — short interest in Tesla as a percentage of its free float is now down to around 3%, from 36% in 2019, according to data from S3 Partners.
“Just when you thought he was about to go over the edge of the cliff, he comes back,” Carson Block, CEO of short seller Muddy Waters Capital LLC, told Bloomberg Television earlier this year when explaining why he wouldn’t wager against Tesla. “This guy for years and years has done nothing but pull rabbits out of the hat.”
Musk isn’t infallible though, and his ability to tip the scales works in both directions, as demonstrated by the volatility in Tesla’s shares in recent months. While the stock started to mount a comeback after Musk announced in April that he would be stepping back from his work in Washington, the very public implosion of his alliance with Trump resulted in the biggest ever one-day drop in the company’s market cap.
Tesla Shares Slumped as Musk Feuded with Trump
Movement of stock price on June 5, 2025
Sources: Bloomberg reporting, X and Truth Social posts.
Nonetheless, Tesla’s shares were still up more than a quarter since the US election as of June 20, outperforming the 3% rise in the S&P 500 over that same period. If confidence in Musk recovers as it has in the past, a market cap well north of $1 trillion can’t be ruled out — regardless of what the fundamentals suggest.
“There’s always another thing coming,” says Brian Mulberry, a client portfolio manager at Zacks Investment Management Inc. and a Tesla investor. “There’s always something more out there with him at the helm, and that is why Elon is so valuable to investors. It is not just about robotaxis or robots, it’s about what next he will come up with.”