Even Next to Nvidia, Tesla's Valuation Looks Ludicrous

Central to Tesla's proposed $1-trillion compensation plan for CEO Elon Musk's is the provision to reach certain market capitalization milestones. From a current valuation of around $1.5 trillion, Tesla's market cap needs to grow more than five-fold to $8.5 trillion for Musk to be awarded the full stock package, which would then be worth around $1 trillion.

And while Tesla's market capitalization has seen even bigger jumps than that in recent years, growing more than 20-fold since 2019, another surge like that seems unlikely from today's point of view. Even more so, because the company's valuation has already priced in a lot of future growth. At $1.5 trillion, Tesla is currently valued at more than 300 times its trailing-twelve-months earnings. To put that in perspective, even $5-trillion juggernaut Nvidia, a company that many consider overvalued, has a TTM price-to-earnings ratio of "just" 55. Nvidia is already at the very heart of the industry that will supposedly re-shape our lives for years to come, however, while Tesla's valuation is largely based on the vague promise of self-driving cars and humanoid robots. In the past four completed quarters, Nvidia’s revenue grew 72 percent – Tesla’s declined 2 percent.

Tesla’s current valuation is that of a company that's growing in the high double digits with a dominant market position in an industry with huge growth potential. And while Tesla may still be dominant in some markets, EV sales have slowed recently and the former undisputed market leader has lost some of its technological edge as legacy carmakers as well as Chinese companies like BYD have caught up. Add to that the fact that many Europeans (and Americans for that matter) have had enough of Musk and his erratic, often toxic behavior and Tesla’s valuation looks even more outlandish.