Ross Gerber's Perspective on Tesla Stock: Still Too Expensive After 50% Drop

Despite a nearly 50% decline in value since mid-December, shares of Tesla Inc. TSLA are still considered too pricey by investor Ross Gerber.

Overview: In a recent interview with Business Insider, Ross Gerber, who leads Gerber Kawasaki Wealth & Investment Management, expressed skepticism about a recovery in Tesla's stock this year. He believes that even with substantial losses, the stock does not present a clear rebound opportunity.

Gerber, a long-time Tesla investor, asserts that the stock remains overpriced. According to him, for any rebound to occur, Tesla's earnings need to show significant growth. Currently, Tesla's shares have a forward price-to-earnings ratio of 65, which is over three times higher than the valuation multiples seen in the S&P 500. This stark difference signals to Gerber that the stock is not a favorable investment option right now. Additionally, he noted that analysts have again lowered their forecasts for Tesla's 2025 vehicle sales, which contributes to his cautious outlook. “There’s this game that is happening now where the fundamental story has to be revalued,” he stated.

Furthermore, Gerber criticized Elon Musk for his controversial political actions that have impacted the brand's perception. Musk's alignment with political figures such as former President Donald Trump has altered Tesla's fan base, resulting in the brand losing liberal support while attracting more conservative customers.

This shift in support has had tangible effects on Tesla's market, including a notable decrease in the resale value of used Tesla vehicles. In a recent post on X, Gerber humorously questioned, “If a liberal sells their Tesla to a conservative, how many new Teslas are sold?”

Significance: The significant drop in Tesla's stock price and the opinion of Gerber on the stock's overvaluation underscore serious issues, particularly relating to the changing demographics of Tesla's customer base amid rising political divides. Earlier in the year, Gerber predicted a 50% fall in Tesla's stock, attributing it to Musk's increasing focus on other endeavors. This forecast has been largely realized, with the stock dropping another 31% since his comments were made in late February.

Gerber has also pointed out challenges in Tesla's used car market, comparing it to the challenges faced by Apple products, where high-quality offerings diminish the need for frequent upgrades by consumers.

A report by JPMorgan Chase recently emphasized that Tesla has rapidly lost brand value and cautioned that the company could face its weakest quarterly deliveries since 2022.

Tesla's current ratings include a momentum rating of 89.66% and a growth rating of 55.23%, according to proprietary assessments. The evaluation considers Tesla's historical earnings and revenue growth across various timescales, placing emphasis on both long-term trends and immediate performance.

Tesla, Stocks, Investment