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An Optimist Would Say Tesla Is Worth $400, Maybe $500/Share

Paul Franke profile picture
Paul Franke


  • Tesla's normalized math-based valuation remains far lower than its current price, largely a function of rising inflation/required discount investment rates.
  • A slowing global economy and a jump in EV competition are real-world risks to future Tesla investment gains.
  • One bright spot is technical momentum trends indicate buying interest has not completely imploded with the Big Tech bust of 2022.
  • I rate TSLA between a Hold for long-time owners and Musk believers to an Avoid for those contemplating adding shares.

Investigation Continues Into Tesla Driver"s Death While In Autopilot Mode

Spencer Platt/Getty Images News

Wild growth names are not my gig. Neither are meme picks or bubble valuations, and all the justifications you have to gulp and swallow. I will admit the Tesla (NASDAQ:TSLA) share quote has

This article was written by

Paul Franke profile picture
Nationally ranked stock picker for 30 years. Victory Formation and Bottom Fishing Club quant-sort pioneer.....Paul Franke is a private investor and speculator with 36 years of trading experience. Mr. Franke was Editor and Publisher of the Maverick Investor® newsletter during the 1990s, widely quoted by CNBC®, Barron’s®, the Washington Post® and Investor’s Business Daily®. Paul was consistently ranked among top investment advisors nationally for stock market and commodity macro views by Timer Digest® during the 1990s. Mr. Franke was ranked #1 in the Motley Fool® CAPS stock picking contest during parts of 2008 and 2009, out of 60,000+ portfolios. Mr. Franke was Director of Research at Quantemonics Investing® from 2010-13, running several model portfolios on the Covestor.com mirror platform (including the least volatile, lowest beta, fully-invested equity portfolio on the site). As of April 2023, he was ranked in the Top 5% of bloggers by TipRanks® for stock picking performance on positions held one year. A contrarian stock picking style, along with daily algorithm analysis of fundamental and technical data have been developed into a system for finding stocks, named the “Victory Formation.” Supply/demand imbalances signaled by specific stock price and volume movements are a critical part of this formula for success. Mr. Franke suggests investors use 10% or 20% stop-loss levels on individual choices and a diversified approach of owning at least 50 well positioned favorites to achieve regular stock market outperformance. The short sale of securities in overvalued, weak momentum stocks as pair trades and hedges is also a part of the Victory Formation long/short portfolio design. "Bottom Fishing Club" articles focus on deep-value candidates or stocks experiencing a major reversal in technical momentum to the upside. "Volume Breakout Report" articles discuss positive trend changes backed by strong price and volume trading action.

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Comments (235)

Circles profile picture
Put down the pipe
TommyIrish profile picture
"For investors wanting to purchase Tesla around $750-$800, I would not be anxious to commit new capital."

I want anyone looking to buy TSLA for $800, or even a measly $750, to call me for a private.

So rich in promise and profitability why do people not get it anymore!

Just a complete bargain!!!
RL2200 profile picture
@TommyIrish Perhaps you might take a page out Cathie Woods play book she has called every price target on $TSLA for the past 6 years. In fact they have in many cases surpassed her price targets!

Cathie Wood's ARK INVEST Dropped A HUGE NEWS About Tesla's Future Valuation==> https://youtu.be/zPMbYYv4PAs
Gruss_Gott profile picture
@RL2200 perhaps you should remember:

* The last 14 years have been one of the longest booms in history; the largest predictor of startup success is when launched with those at the beginning of boom winning, those at the beginning of recession losing.

* The last 5 years have seen some of the biggest QE in history, along with historic low interest rates

* The last 3 years have seen the greatest stimulus in history

* The US stock market is in a 3-sigma bubble, the same as in 1929, 1999, 2007

In the EU, China, and the US, all of this is beginning to unwind. Banks are raising rates and beginning QT. The odds of a recession within 2 years are high. Every flag is flying: 2/10 inversion, energy spike, bond prices, etc

A revert to the mean event is looking highly likely ... and Musk has a "super bad feeling".

My guess is, Musk's super bad feeling is due, in part, to seeing his Chinese demand & production data and/or global demand / pre-order cancellations.

RL2200 profile picture
@Gruss_Gott To be fair China is a victim of its draconian zero covid tolerance policy which is why Cathie Woods sold off all of the "made in china stocks" last year. We also have realestate sandal aka FRAUD which started back in September of last year. So its not a lack of demand for Tesla cars but rather an economy that's been ravaged by shut downs. To be honest they will starve long before they die from any flu virus which has seen a "kill rate" of less than 1% on per capita basis!
pd mar profile picture
pd mar
04 Jun. 2022
Tesla indeed is a fascinating company that elicits strong polarizing reactions from people. I personally find their cars, and more specifically their model 3, quite uncomfortable, especially for backseat passengers. I think some of their build quality could be improved upon and their competitors offer better build quality. Nevertheless, they are some of the most fun cars to drive and I think they’ll continue to have incredible brand loyalty for many years to come. Being condescending towards a Tesla owner is just as futile as the many decades PC owners belittled Apple users by criticizing them for overpaying for overpriced hardware. Apple stockholders nevertheless had the last laugh. Tesla too could have the same fate if they focus on continuing that brand loyalty by improving the build quality and providing stellar customer service. I’d have no problem buying TSLA shares at $450 and slowly dollar cost average down through this bear market should it go lower. From 2020 through 2021 the share price got way ahead of itself. Glad to see it’s inching back down towards something more reasonable.
E.D. Hart profile picture
We are entering a new paradigm---lower growth, and higher costs.
This is the double whammy. It applies to the company as well as to the consumers who buy the companies products.

Then, the triple wham is when we consider that the discount to earnings in the future is much higher, necessarily bringing down the multiple.

TSLA bulls say---"hasn't happened yet!" and, "so far Im up 500% on my shares...I'm never selling!"

I get it---projecting the past into the future.

But to me that sounds like deductive logic:
Growth stocks grow forever, outperform the market, and always beat value.

TESLA is a growth stock.

QED: TSLA will grow forever, outperform the market, and always beat value.

Problem is, the best financial decisions are made inductively. Market pricing is an inductive machine--with the sentiment inputs determining which data to emphasize.

But market historians recognize that there are key turning points where the investing landscape changes, and asset classes that did well for a decade, do horribly for the next 8-10 years.

Oil stocks and gold did great in the 1970s--outpacing the markets. Financials did great in the 1980s. Technology did fantastic in the 1990s. Commodities, and real estate did well in the 2000s until 2008. And the 2010s were fantastic times for technology companies.

The 2020s look to be another change in market leadership, led by undervalued real assets like oil, other commodities, and some selected farmland, and real estate.

Look for things that are cheap, and disliked. (oil stocks are very cheap at 20-30% free cash flow yields, and oil is going higher).

The past is a roughly accurate picture of the future, and works well most of the time---until it doesn't.

TSLA $400 in 2023
RL2200 profile picture
@E.D. Hart Perhaps $TSLA will hit $400 but only bacause the rest of the market has capitulated another 25-50%. I will not preach on the nefarious nature of the FED and its monetary manipulation which cause these boom & bust cycles but if you need material I have a dozen books and several PHD decertations from Ivy League Schools on this very subject matter!
E.D. Hart profile picture
@RL2200 thank you for the author. I concur. All markets are manipulated. And it is nefarious.
RL2200 profile picture
@E.D. Hart Manipulating the World Economy: The Rise of Modern Monetary Theory & the Inevitable Fall of Classical Economics - Is there an Alternative? by Martin A Armstrong
HA Research profile picture
A realist would say that TSLA should trade at other car company valuations.
RL2200 profile picture
@HA Research A realist would say that only 25-27% of the employees work on the car portion while the rest work on the software / r/d research
HA Research profile picture
@RL2200 Burning cash on R&D when competitors are just supplying the market with EVs. FSD 'at some point' does not bridge the valuation gap.
RL2200 profile picture
@HA Research BTW they are miles ahead on FSD but the R&D I was speaking of is pertaining to the optimus robot , robo taxis, roof installations for solar panels etc etc
Contrarian Max profile picture
Elon just said he is going to layoff people, aka growth story is over for now. Its time to sell.
Circles profile picture
@Contrarian Max go ahead, bad decision.
Contrarian Max profile picture
@Circles I took profits on Tesla end of 2021, just waiting for another low entry point. The myth 'experts' like to spread is people that attempt to time the market lose money all things in moderation attempting to time based on guesses if foolish just like forever being bullish is foolish. I look at real economic data sold all my tech and high PE stocks in 2021 rotated to inflation and recession stocks. There will be plenty of buying chances at lower prices for Tesla before the stock split.
@Contrarian Max: Denying reality won't end well for your ilk. But by all means, continue to delude yourself. Especially that you can time the market well. LOL
Of course the author is correct and I think $400-$500 per share is VERY generous.
This valuation is _way_ off. Tesla traders more like Nvidia than any automaker. The auto business is a small part of overall Tesla market valuation.


I show that statistically in my two part valuation videos.

The AI/Software aspect of Tesla is far more valuable, and insurance, energy both have real promise for the future.

Growth really aren't your thing. In this situation: some value stocks are going to get wammied by fast change: you might want to look at which ones will and won't.
03 Jun. 2022
Tesla loses power trapping driver inside then burst into flames!

Transport Canada now has the vehicle for an inspection

RL2200 profile picture
@jgcc This is an anomaly vs the the trend with Chevy Volt where they had to literally recall all of the cars and have them returned while simultaneously stopping sales ==>

GM temporarily stops making the Chevy Bolt after latest recall www.theverge.com/...
one point people seem to forget is dilution... Tesla is a champion of dilution as stock based comp is very high. Amazon is a bigger bubble though.. In both cases CEOs started selling at the top and were selling again recently
dmce profile picture
@Paul Franke - "Wall Street appears to assume growth rates will not slow, no matter the level of EV sales at other automakers in 2022-23. "

That's because Wall Street knows that

- Consumer sentiment has shifted very strongly in favor of considering an EV for their next vehicle purchase

- Tesla has only a 1.5% share of worldwide light vehicle sales. The Tesla TAM is huge

- Legacy automakers continue to be slow in ramping BEV production. Even their forecasts for future EV production capacity (e.g. 600K by the end of 2023 for Ford) undershoot both consumer demand for EVs and Tesla's increasing production capacity (3M+ by end of 2023).
@dmce funny how all the comments concern US market. Europe and China: competition is growing super fast
Gruss_Gott profile picture
@dmce The $TSLA TAM is not huge - that's a total misunderstanding of the auto market.

In 2016 $TSLA Model S/X hit a sales ceiling, i.e., there were only so many people in the market for a luxury sedan/crossover that was also an EV and was also a Tesla.

Tesla was smart, they recognized the sales ceiling early, and in 2017 started production to enter into a new segment, entry-luxury-sedan/CUV with the Model 3/Y.

It's been a great 5 years, but since 5 years is a long time, it's made people forget that the entry-luxury segment is sales-limited just like S/X was & is.

Tesla is about 50% of the way through the entry-luxury segment and soon that sales ceiling will come into view. The max sales Tesla could hit with their current product line is ~2-3M units and/or about the same size as BMW or Mercedes in terms of yearly sales.

Tesla did not grow the TAM of the luxury sedan segment with S/X and Tesla won't grow the TAM of the entry-luxury-sedan segment with the 3/Y.

Further, the CT isn't a high volume segment (lifestyle unibody pickups), so $TSLA isn't likely to pickup much there, and certainly nowhere near the volume it'd need to keep growing at the same rate.

Tesla knows all this, but curiously isn't planning on any new high volume segments, so it's a bit of mystery.
dmce profile picture
@Gruss_Gott - "Tesla was smart, they recognized the sales ceiling early, and in 2017 started production to enter into a new segment, entry-luxury-sedan/CUV with the Model 3/Y."

Yes, really early. Like in 2006 when Musk published his first "secret Tesla Motors master plan", which included a third vehicle that was less expensive than the "sporty four door family car" that was to follow the Tesla Roadster.


"Further, the CT isn't a high volume segment (lifestyle unibody pickups)"

With built in power outlets and air compressor, hard to scratch/dent stainless steel body, 100 cu ft of external lockable stowage, easy loading tailgate ramp, 6.5 ft bed and height adjustable air suspension the CT will fit right in at the jobsite. Unlike the Rivian it is not just a lifestyle pickup.

"Tesla knows all this, but curiously isn't planning on any new high volume segments"

You are not privy to what Tesla is planning. One thing Tesla has been really good at is keeping their future product plans secret if there is any chance of those plans Osborning the sales of current products. Even after new products have been revealed but not yet delivered Tesla has downplayed them to keep sales of current products strong.

Tesla aspires to sell 20M cars annually by 2030. They know all about price elasticity in the auto market. As the first new US auto company to not go bankrupt in 100 years Tesla has proven that they aren't stupid. Don't underestimate Tesla the way so many legacy auto executives did.
dmce profile picture
@Paul Franke - "the forward 1-year PEG ratio (price to earnings growth rate) has moved from an arguably constructive and bullish area 12 months ago, to a seemingly pedestrian multiple above 1x."

PEG is not price to earnings growth rate, it is the price to earnings ratio DIVIDED BY the growth rate. Lower numbers are better, since it shows that the seemingly high PE is justified by a very high growth rate.

Tesla has grown revenues at a 50% compounded rate for the past 5 years. Profits have grown even faster as Tesla has achieved operating leverage as it has gotten bigger. Tesla is the fastest growing company ever at $50B in revenues and has the highest operating and net margins in the auto industry. All of which explains Tesla's seemingly high but in fact justified valuation.
Paul Franke profile picture
@dmce I could have explained PEG better.
gametv profile picture
My problem with this article is simply that if you believe Tesla's valuation should be much lower due to the inflation rate of 8% we are now seeing, then basically everything is highly overvalued by that same logic.

If anyone really believes that 8% inflation is here to stay, then nearly all equities are overvalued and will fall.

My feeling is that the inflation rate will get cut pretty fast in the second half of this year, as consumer spending tanks and companies realize that they dont have pricing power (in most cases). For any product that has real competition or is discretionary, consumers are going to revolt.

BTW, I bought a Tesla a couple years back. Best purchase ever. My wife and I drive the Tesla almost exclusively, except for the few times we need to drive our SUV. savings are at least 300 a month, maybe 400. I could probably sell it for the same price I paid for it since prices have gone up. An environment of high gas prices will drive BEV adoption and keep Tesla factories running at full capacity.
RL2200 profile picture
@gametv Long term $TSLA is very cheap we are looking at market cap of 5-15 trillion (easily if not higher) in the coming decade with production rates of 10-20 million cars per year and none of that includes the robots, monthly subscriptions rates on those robots, FSD subscription rates, insurance (given the less accidents of FSD has vs a human), & last but not least the robotaxis that will take UBER's lunch!
gametv profile picture
I have a question for you. You say that noone should be paying more than 12x to 14x for any low growth stock due to 8% inflation rate.

Are you assuming that 8% inflation rate is going to happen again next year? I really think that the Fed will continue to tighten and is willing to even overshoot by tightening a little too much, to swat down inflation. The Fed is using some shock and awe tactics here to put a cap in inflation. The economy is starting to stagger and even go into recession, this is not going to be a long term inflationary trend.

As demand begins to fall, there will be a quick halt in the inflation picture. I dont expect rates to fall rapidly, but they WILL fall.

At some point the Biden admin will be forced to cave on the fracking bans on federal land and allow more production and within a year or so, energy inflation will be gone and consumers will punish any company that gets too greedy. My car wash just dramatically raised prices - screw them - not going back - time to make greedy bastards pay by saying goodbye. Will do this on ALL discretionary purchases and so will most people, even the people who can really afford things.
Paul Franke profile picture
@gametv I am hoping for 6% CPI this calendar year and 5% next year. We can only reach lower numbers with a recession. Musk is worried a recession is here. Maybe their car sales numbers are below target.
Stilldazed profile picture
@Paul Franke

Be very careful, Musk is the master of sandbagging.
dmce profile picture
@Paul Franke - "Maybe their car sales numbers are below target."

Delivery lead times for new orders of some Tesla models and trims stretch out to a year. Tesla's car prices have been going up, not being reduced. So there is no evidence that Tesla sales numbers are below target.
You suppose Musk will still take his company private at $420 a share? 😛
I wasn’t expecting these type of documents... seems the 2020 retail investors are dead. 😃
treespace profile picture
I've done some serious valuation analysis and came up with $420 per share provided consumer sentiment remains elevated. Musk seems to be turning into an angry ogre, threatening to fire everybody.

TWTR CEO affirmed that employees should work where ever and how ever they feel productive, while Musk wants everybody in a cubicle with ankle bracelets and two 15 minute bathroom breaks.

I found it confusing when Musk said he was "still committed" to the TWTR deal. Who does that? Who signs a complex legally binding contract to buy a publicly traded company and then pretends it's just a non-binding letter of intent that he can honor or not on a whim?
captainccs profile picture
@treespace "TWTR CEO affirmed that employees should work where ever and how ever they feel productive, while Musk wants everybody in a cubicle with ankle bracelets and two 15 minute bathroom breaks."

Twitter loses money. Tesla makes money. Time to replace the 'TWTR CEO.'
Ra's al Ghul profile picture
380.-, and it's still ridiculously expensive. .

DFV Deep Value profile picture
How does this knucklehead value a company that is one of the worlds greatest short squeezes of all time? Short term valuations are meaningful to no one on tesla, tesla is a 10B company.
uptick_rule_now profile picture
I am not as optimistic. I would say maybe $4 or $5 pre (first) split pricing is generous for Turdsla and the lying con man fElon Musk (who should be in jail)
DFV Deep Value profile picture
@uptick_rule_now you’re also broke and didn’t buy a single a share, you’re the type to buy high and sell low.
RL2200 profile picture
@Dailylong Another loZer (uptick) who missed the ride little does he know the best is yet to come in the next decade(s). $TSLA will be a robo taxi service , robots & its subscription rates (for the lacking work ethic of gen Z's), FSD & its subscription rates, insurance , battery storage for power companies so they meet the climate goals set forth by the Paris Accord, & few solar panels for homes to top it off with a cherry. So as you can see $TSLA is a software company who for the time being happens to make cars !
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