We came across a bearish thesis on Tesla, Inc. (TSLA) on Value Investing Subreddit Page by kumaratein. In this article, we will summarize the bears’ thesis on TSLA. Tesla, Inc. (TSLA)’s share was trading at $278.39 as of March 24th. TSLA’s trailing and forward P/E were 136.47 and 100 respectively according to Yahoo Finance.
Tesla’s latest recall of nearly 46,000 Cybertrucks marks its eighth recall in just 14 months, highlighting persistent quality control issues. This comes as the company faces a steep decline in global sales, with January 2025 European deliveries plummeting 50% year-over-year, particularly in its largest markets, Germany and France. Meanwhile, Tesla’s struggles in China, the world’s biggest EV market, have intensified, with sales down 50% year-over-year in February 2025 as BYD continues to dominate by offering cheaper and more competitive models. Despite these headwinds, Tesla still trades at an astonishing 122x trailing 12-month P/E as of March 24, 2025—far exceeding Nvidia’s 40x P/E, despite Nvidia arguably being the top AI beneficiary, and BYD’s 52x P/E, a direct EV competitor.
These numbers don’t even account for growing structural issues. Tesla lags behind Waymo in autonomous driving, and the stigma surrounding Elon Musk has increasingly hurt the brand, making used Teslas difficult to sell. Furthermore, allegations of fraud involving a mysterious bulk purchase of Teslas in Canada ahead of an expiring EV tax rebate have raised new concerns. Political dynamics also play a role—after years of denouncing EVs, conservative figures like Trump and Hannity are unlikely to drive Republican buyers toward Tesla, while many liberals are actively boycotting the brand due to Musk’s controversial actions.
Given these challenges, Tesla’s current valuation is difficult to justify. For Tesla to maintain its inflated multiple, it would need to somehow outcompete BYD in China, overcome political backlash across key markets, surpass Waymo in autonomy, and offset the failure of the Cybertruck—all while its CEO remains distracted and continues to damage the brand. Even Nvidia, operating in a high-growth sector with minimal competition, trades at just one-third of Tesla’s P/E. The reality is that Tesla’s current valuation is built on unrealistic expectations that simply do not align with the company’s trajectory.
Tesla, Inc. (TSLA) is on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 126 hedge fund portfolios held TSLA at the end of the fourth quarter which was 99 in the previous quarter. While we acknowledge the risk and potential of TSLA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TSLA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.