How overvalued is Elon Musk’s Tesla, which has a market capitalization of 1.4 tons?
Elon Musk’s unwavering support for President-elect Trump has paid off handsomely for his network of tech businesses. Since Trump won the election in November, the CEO of Tesla (TSLA), SpaceX and several other companies has seen his wealth surge 83.4% to nearly $500 billion, becoming the first person ever to reach that level. status person.
Shares of Tesla, Musk’s only publicly traded company, have risen nearly 90.8% since the election to around $480 a share, reflecting investor sentiment that the CEO’s new alliance with the president-elect will The electric car maker delivers big results.
Dan Ives of Wedbush Securities expects Tesla to face less regulatory pressure on innovations such as autonomous driving technology. “We fully expect these key initiatives to move forward quickly with Trump in the White House,” Ives wrote in a Nov. 29 note to clients. Ives will be targeting Tesla stock next year. The price target was raised to $515 from $400.
Ives is not alone. 25 of 57 analysts surveyed by FactSet are bullish on Tesla. Although Tesla’s price-to-earnings ratio of 125 is the highest among all major technology companies, it’s more than double Nvidia’s 51.71. The average price-to-earnings ratio for S&P 500 companies is 27.87.
On November 15, Morningstar listed Tesla as “overvalued,” citing the post-election rally as the main reason. Stifel Group’s Stephen Gengaro calls Tesla “significantly overvalued,” but still has a “buy” rating on the stock. Gengaro’s analysis believes that while Tesla may be overvalued as a car company, ambitious projects such as its FSD (fully self-driving) software and newly launched robotaxi services may justify its stock price. . Tesla is “clearly more than just an automaker,” Gengaro said in a note to clients on Dec. 1.
The growth in Musk’s wealth also comes from SpaceX’s latest round of stock buybacks, which has valued the private rocket and satellite maker at $350 billion, making it the world’s most valuable private company. Stock buybacks typically demonstrate confidence in a company’s financial health and future prospects, while providing liquidity to early investors and employees. SpaceX raises secondary financings about twice a year, giving employees and other shareholders a chance to sell stock.
Musk’s wealth is mainly divided between Tesla and SpaceX. He owns about 13% of Tesla (currently worth $195 billion) and about 42% of SpaceX (worth $147 billion), according to a 2024 proxy statement. In addition, Musk also owns X, xAI, The Boring Company and Neuralink, with a total value of approximately US$78 billion.
It’s worth noting that Bloomberg’s calculation of Musk’s net worth still includes Tesla’s 2018 compensation package, which promised to grant him stock options worth $56 billion before a series of performance goals were achieved. Earlier this month, Delaware County Judge Kathaleen McCormick invalidated the pay package for the second time. McCormick first scrapped the compensation package in January, arguing that Musk might have had too much influence over how it was set. Tesla’s board of directors resubmitted the plan to a shareholder vote in June, and it passed overwhelmingly. Tesla said it plans to appeal the judge’s second rejection.
