If you’ve been watching Tesla’s share price, you’re probably wondering what’s next. Some days, it feels like every headline could send the stock soaring or sinking, and the past year has shown just how fast sentiment can change. Tesla’s price has climbed an impressive 55.9% over the last twelve months, despite being down 12.0% year-to-date. That’s quite a roller coaster, and the story behind those moves is anything but boring. The action isn’t just about market mood swings. Tesla caught a fresh round of attention as data surfaced from a recent lawsuit involving Autopilot, while concerns about the company being outsold by BYD in Europe have turned up the competitive heat. Factor in consumer skepticism about Tesla’s Full Self-Driving systems, with surveys showing buyers are more wary than drawn in, and you get a recipe for volatility. Even so, after a solid 8.3% gain over the past 30 days, investors seem to be rebalancing risk and potential once again. Against this backdrop, one big question looms: is Tesla undervalued, fairly priced, or riding on hype? According to our valuation score, which adds a point for each of six criteria Tesla clears as “undervalued,” the company currently lands at 0 out of 6. That means none of the typical undervaluation checks pass for Tesla right now. But valuation is rarely straightforward, especially with a company that is as ambitious, innovative, and controversial as Tesla. Next, let’s dig into how we assess value, walk through each approach, and explore why some methods just do not tell the whole story. Stick around for an alternative view you will not want to miss. Tesla scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
The Discounted Cash Flow (DCF) model is a cornerstone for intrinsic value assessment. It projects a company’s future cash flows and then discounts them back to today’s dollars. Essentially, it asks what all that future money is really worth right now, given the risk and time value of money.
For Tesla, the most recent reported Free Cash Flow stands at $6.63 billion. Analysts provide detailed projections for the next five years, showing significant expected growth. By 2029, Tesla’s Free Cash Flow is estimated to reach $21.94 billion, with further extrapolations by Simply Wall St. extending to 2035, where projected annual Free Cash Flow reaches even higher levels.
Using these cash flow projections, Tesla’s DCF fair value is calculated at $126.02 per share. When compared with Tesla’s current market price, this implies the stock is 164.9% overvalued relative to its intrinsic value using this method.
While Tesla’s growth story is ambitious, the DCF model suggests that high expectations are already reflected in the current price. For value-focused investors, this is a clear flag.
Result: OVERVALUED
Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Tesla.
TSLA Discounted Cash Flow as at Aug 2025
Our Discounted Cash Flow (DCF) analysis suggests Tesla may be overvalued by 164.9%. Find undervalued stocks or create your own screener to find better value opportunities.
For consistently profitable companies, the Price-to-Sales (P/S) ratio is a reliable yardstick to compare a stock’s valuation relative to its revenue. This metric is particularly useful in growth sectors where earnings may be volatile while sales continue to provide a stable benchmark for underlying performance.
A higher P/S ratio can be justified by strong growth prospects or lower risk, while slower growth or higher risk typically results in a lower P/S ratio. In Tesla’s case, both growth momentum and competitive positioning play major roles in determining what might be considered a “normal” valuation.
Tesla currently trades at a P/S ratio of 11.61x. This figure is substantially higher than the Auto industry average of 1.32x and the peer average of 1.11x, placing Tesla at a significant premium to the broader sector and similar companies.
To explore further, Simply Wall St’s proprietary “Fair Ratio” for Tesla is calculated as 2.83x. The Fair Ratio goes beyond simple peer and industry averages by incorporating Tesla’s unique growth, profitability, risk factors, margin profile, industry norms, and market cap to produce a more tailored metric for the company.
Comparing Tesla’s current 11.61x P/S ratio to its Fair Ratio of 2.83x, the stock appears significantly overvalued by this measure. The difference suggests investors are assigning a growth premium well above what is indicated by the company’s fundamentals and risk-adjusted outlook.
Result: OVERVALUED
NasdaqGS:TSLA PS Ratio as at Aug 2025
PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.
Earlier we mentioned that there’s an even better way to understand valuation, so let’s introduce you to Narratives.
In simple terms, a Narrative is your own story or perspective on a company, which you back up with your own assumptions about its future revenue, profit margins, and valuation. This approach essentially connects the company’s big picture vision with the numbers behind its value.
Rather than just relying on a single “fair value” estimate, Narratives make the investment process more practical and dynamic by letting you create a financial forecast rooted in your outlook. This allows you to automatically compare your own fair value to the current share price.
This framework is easy to use and available to millions of investors within the Community page on the Simply Wall St platform, making it accessible for everyone from beginners to professionals.
Narratives help you decide when to buy or sell by allowing you to see if your forecasted fair value is above or below the market price. They update in real time as new information, such as news or earnings, becomes available, helping you react quickly to key developments.
For example, some investors believe Tesla’s fair value is $67.45 based on muted growth and lower margins, while others project it could be $2,707.91 if the company achieves rapid expansion across AI, energy, and robotaxis. This demonstrates how Narratives put the power of valuation in your hands.
For Tesla, we’ll make it easy with previews of two leading Tesla narratives:
🐂 Tesla Bull Case
Fair value: $2,707.91
Undervalued by 87.7%
Revenue growth forecast: 77%
Suggests Tesla could evolve into a multi-industry technology leader by 2030, capitalizing on advances in AI, robotics, energy, and software.
Forecasts total revenue of $1.94 trillion with a 27.5% net profit margin. This would support a fair stock price in the thousands if the company achieves its vision.
Highlights significant potential upside if Tesla succeeds in Full Self-Driving, energy solutions, and rapid innovation, while acknowledging risks from execution and competition.
🐻 Tesla Bear Case
Fair value: $322.21
Overvalued by 3.6%
Revenue growth forecast: 18%
Focuses on Tesla’s Dojo supercomputer and battery technology as central to future growth, with substantial expansion in software and services anticipated.
Notes rapid progress in self-driving technology and energy storage, but suggests that market optimism may have led to elevated current pricing.
Raises concerns about heavy reliance on optical sensors and execution risks, cautioning that these factors could limit Tesla’s ability to meet its ambitious projections.
Do you think there’s more to the story for Tesla? Create your own Narrative to let the Community know!
NasdaqGS:TSLA Community Fair Values as at Aug 2025
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include TSLA.
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