Key Points
Besides being a genius entrepreneur, Elon Musk deserves credit for convincing investors to focus on the future.
The core business of selling electric cars is struggling, but the market doesn’t seem to care.
Tesla’s current valuation might already bake in success with its self-driving and robotics efforts.
Tesla(NASDAQ: TSLA) might be one of the most polarizing companies on the market. However, investors can’t complain about the returns. Shares are up 3,300% in the past decade.
It’s clear that the business and its visionary founder and CEO, Elon Musk, have received ongoing support from the investment community. This has occurred while Tesla’s core operations have been under immense pressure.
Will AI create the world’s first trillionaire? Our team just released a report on the one little-known company, called an “Indispensable Monopoly” providing the critical technology Nvidia and Intel both need. Continue »
If you’re bullish on this electric vehicle (EV) stock, pay attention to this one warning sign.
Image source: Tesla.
What does the valuation reflect?
The major red flag that shouldn’t be ignored is the current valuation. Shares trade at a price-to-earnings ratio of 375. That’s an astronomically high figure that helps make Tesla one of the world’s most valuable companies, as its market cap of $1.5 trillion is almost 5 times that of the next-most-valuable carmaker, Toyota. This is an inflated share price that adds significant downside risk should the company fail to deliver.
Tesla is a story stock. The market has fully bought into the grand vision Musk has introduced. He has trained investors to strictly focus on what the future might bring.
I’d argue that the valuation reflects an extremely high probability of success with robotaxis and robotics. There is still a lot of work to do, though.
While the robotaxi service is only operating in Austin and the Bay Area today, Musk believes his company will run a self-driving ride-hailing service throughout the U.S. as early as this year.
A mass market version of the robot, called Optimus Gen 3, is expected to be introduced this quarter. The plan is to ramp up production, bring costs down, and sell this machine to enterprise and household customers. Musk previously said that Optimus will lead Tesla to a $25 trillion market cap.
Shrugging off the obvious concerns
Tesla’s automotive revenue dipped 10% in 2025, and overall net income fell 46%. The core business of selling EVs has gotten weaker in recent years, as competition has intensified. Maybe Musk has decided that this isn’t a game he wants to play anymore. Investors who care about fundamentals should proceed with caution.
However, the mentality of Tesla’s shareholder base most likely resembles the mentality of a venture capitalist instead of Warren Buffett. And the core auto business likely accounts for only a small portion of the valuation.
Of course, if Tesla makes good on its promises, there is tremendous upside. In theory, if robotaxis and robotics are enormously successful, which is not a sure thing, then the company could be raking in incredible profits down the road.
It just doesn’t help that expectations are already through the roof, with almost no room for error.
Don’t miss this second chance at a potentially lucrative opportunity
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
Nvidia:if you invested $1,000 when we doubled down in 2009,you’d have $480,903!*Apple: if you invested $1,000 when we doubled down in 2008, you’d have $52,909!*Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $443,299!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, available when you joinStock Advisor, and there may not be another chance like this anytime soon.
*Stock Advisor returns as of February 7, 2026.
Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
!['Making [it] more accessible should be the priority'](https://www.evshift.com/wp-content/uploads/2026/02/1770519686_174d343b287530a5256909e857f76f29-770x515.jpeg "‘Making [it] more accessible should be the priority’")