Prominent Tesla Inc. (NASDAQ:TSLA) analyst Gary Black has aimed at “Tesla bears,” particularly long-term bear Drew Dickson, for what he calls a fundamental misapplication of traditional automotive price-to-earnings (P/E) ratios to Elon Musk‘s burgeoning electric vehicle business.
What Happened: Black argues that the approach of using the auto industry’s P/Es for Tesla overlooks the stark differences in growth trajectories between the rapidly expanding EV market and the declining internal combustion engine (ICE) vehicle sector.
“The biggest mistake $TSLA bears make is slapping an auto industry P/E on TSLA’s EV business,” said Black.
Black dissected Dickson’s latest report, which attempts to value Tesla’s automotive business by applying an average P/E of 6.5x to 7.7x, derived from traditional automakers like Ford Motor Company (NYSE:F), Bayerische Motoren Werke AG (BMW), Mercedes-Benz Group AG, General Motors Company (NYSE:GM), Renault SA, Stellantis NV (NYSE:STLA), Volkswagen, Honda Motor (NYSE:HMC), Toyota Motor Corporation (NYSE:TM), and SAIC Motor. Corp. Ltd.
Dickson’s analysis suggests that even at a generous 15x P/E for Tesla’s automotive business, its market capitalization would be around $100 billion, implying that the market already assigns a staggering $1 trillion valuation to Tesla’s non-automotive ventures such as FSD, robotaxis, Optimus, and energy business.
According to Black, Dickson’s analysis “ignores the fact that TSLA is 100% EVs which are growing at 25-30% per year while ICE vehicles are in a state of permanent decline,” Black posted.
“Of course there should be a huge difference in P/Es between EV manufacturers and ICE manufacturers given stark differences in growth prospects.”
Why It Matters: Benzinga Pro data also highlights that Tesla was the most overvalued among its peers.
| Automobile Stocks | Forward P/E |
| Tesla Inc (NASDAQ:TSLA) | 163.934 |
| General Motors Company (NYSE:GM) | 5.269 |
| Ford Motor Company (NYSE:F) | 8.475 |
| Honda Motor (NYSE:HMC) | 9.901 |
| Toyota Motor Corporation (NYSE:TM) | 9.891 |
| BYD (OTCPK: BYDDY) | 57.804 |
| Li Auto Inc (NASDAQ:LI) | 17.857 |
Black, who is not holding Tesla in his current portfolio, did express some near-term concerns. He highlighted the asymmetrical risk/reward associated with the upcoming Austin robotaxi test, scheduled to begin on June 22nd.
He also voiced apprehension that the “more affordable vehicles” targeted for the third quarter might be lower-cost, which could cannibalize sales of more expensive trims.
Finally, Black anticipates that Tesla’s second quarter volumes are likely to disappoint, projecting approximately 380,000 deliveries against a Street consensus of 402,000. He attributes this potential shortfall to the ongoing EV price war in China, led by BYD (OTCPK: BYDDY).
Price Action: TSLA shares were 0.61% higher in premarket on Wednesday. The stock was down 16.61% year-to-date, but it has returned 71.09% over the year.
About 26 analysts tracked by Benzinga, covering TSLA, have a consensus target price of $309.76 apiece, with a ‘hold’ rating.
The targets range from $19.05 to $500, and the recent ratings by Piper Sandler, Morgan Stanley, and Baird imply an 18.59% upside for the stock.
Benzinga Edge Stock Rankings shows that Tesla had a stronger price trend over the short, medium, and long term. Its momentum ranking was solid; however, its value ranking was poor at the 9.41th percentile. The details of other metrics are available here.
The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, rose in premarket on Wednesday. The SPY was up 0.31% at $599.39, while the QQQ advanced 0.38% to $531.07, according to Benzinga Pro data.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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