Ross Gerber's Perspective on Tesla Stock Valuation Amidst Recent Declines

Despite experiencing nearly a 50% decline in its share value since mid-December, Tesla Inc. (TSLA) remains a stock that seasoned investor Ross Gerber believes is still overpriced, preventing him from reinvesting.

Gerber's Take on the Stock's Outlook: In a recent interview, Ross Gerber, president and CEO of Gerber Kawasaki Wealth & Investment Management, expressed concerns regarding Tesla’s prospects. He indicated that he does not foresee a clear path for recovery in Tesla's stock this year, despite the significant drops that have already occurred.

Gerber emphasizes that a rebound in Tesla’s stock would require an increase in earnings. As of now, Tesla is trading at a forward price-to-earnings ratio of 65, significantly higher than the S&P 500’s average. He described the stock as being overvalued, especially in light of analysts revising down their forecasts for Tesla's 2025 vehicle sales for the second consecutive year. Gerber remarked, “There’s this game that is happening now where the fundamental story has to be revalued.”

The Impact of Elon Musk's Actions: Additionally, Gerber criticized Elon Musk for his controversial political stance, which he believes is negatively affecting the Tesla brand. Musk's close ties to former President Donald Trump may have shifted the brand’s appeal, leading to a loss of support among liberal consumers while attracting a more conservative buyer demographic.

This political discord has reportedly resulted in many owners selling their Tesla vehicles, contributing to a decline in the resale value of used Teslas. In a humorous post on social media, Gerber pondered, “If a liberal sells their Tesla to a conservative, how many new Teslas are sold?”

Challenges Ahead for Tesla: The concerning trends in Tesla’s stock price, combined with its perceived overvaluation, highlight the shifting landscape of its customer base and the political divide among consumers. Earlier, Gerber had correctly predicted a 50% decrease in Tesla’s stock for 2023, largely due to Musk’s focus being diverted to other projects, a forecast he has seen materialize with the stock plummeting an additional 31% since his statement in February.

Gerber also pointed out challenges for Tesla in the used car market, suggesting that the company's high product quality may dissuade frequent upgrades by existing customers—akin to a problem faced by Apple.

A recent analysis by JPMorgan Chase echoed Gerber’s concerns, asserting that Tesla has lost substantial brand value too quickly. They also indicated that Tesla may report its lowest quarterly deliveries since 2022.

Current Ratings: According to proprietary ratings, Tesla holds a momentum rating of 89.66% and a growth rating of 55.23%, indicating a complex view of its future growth prospects.

Tesla, Gerber, Stocks