Earlier this year, Katie Wood made another bold prediction for Tesla(Nasdaq: Tsla)S The founder of the Ark Invest-one of the most popular suppliers of actively managed stock funds (ETFs)-he is that Tesla’s shares will reach $ 2600 in five years.
This would be more than 10 times the bigger than its current price of about $ 225 and would mean that the company would cost nearly $ 10 trillion in market capitalization.
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This is a fantasy. Investors need to forget these optimistic cases of tesla bulls and look at the main foundations of business that are not beautiful. The shares are extremely unlikely to increase 10 times over the next five years. Here’s what is more likely to happen instead.
The bigger part of the current Tesla market cap of $ 720 billion comes from his business with electric vehicles (EV) and currently this business is struggling to grow. In the first quarter of 2025, the company supplied 337,000 customer vehicles while producing 363,000. This was reduced from 387,000 in the same quarter a year ago and the lowest digit for delivery from the third quarter of 2022.
With the advancement of deliveries, as well as the growth of revenue. In fact, revenue will almost certainly fall faster than deliveries in the first quarter, when we see the company’s financial statements next week, due to the falling prices of the stickers of its vehicles.
In the fourth quarter of 2024, Tesla’s supplies increased slightly, but car revenue dropped by 8% compared to a year. The first quarter will look more with a sharp reduction in deliveries, and the profit margins are about to be hit. The operative margin has been halved in the last few years, reaching 8% in the last 12 months.
Tesla loses market share in China, Europe and major markets in the United States as California. The EV revolution is still being hit, but for some reason buyers choose competitors. This is a problem for Tesla that investors should not ignore.
With the drying of the EV market, CEO Elon Musk strives for some new markets to explore. These include things like autonomous driver’s cyberbers and other artificial intelligence initiatives (AI). However, the founder seems to invest in AI at a whole new start called XAI, to which Tesla investors have no exposure.
Another new product management is the Optimus super -humanoid robot, which it claims will hit pilot production in 2025. You call me skeptical to this time line.
At her Cybercab event last year, Optimus robots were remotely controlled by people, which is not how they should work. Investors should take it with grain salt when listening to Musk, they claim that Optimus has a $ 10 trillion revenue. Let’s first get a working prototype before we believe that this product will be 50 times the bigger than the annual sales of the iPhone.
All this means that Tesla may have some innovative products in research and development, but this is true for most technology companies. It will be years before autonomous robots are important for the bottom row of Tesla if the product line is successful in the commercial network.
Contrary to what some may think, Tesla has produced some flops over the years, including the tile on the sun roof, Cybertruck and Tesla Semi. They have all lost money.
TSLA ratio data from ycharts.
Tesla’s revenue is falling and will continue to fall for the rest of 2025, and yet the final revenue shares are multiples. Its price-profile ratio (P/E) is 118, which is more than any other “magnificent seven” stock. Remember: this ratio P/is likely to increase in 2025, with deliveries being determined by making a profit with themselves.
This does not look like the perfect time to invest in Tesla. For the next five years, I think the stock is for a world of injury. I would not be surprised if the shares fall 50% or more five years now, as the P/E ratio of the shares decreases. It is a company with falling sales, narrowing of profit margins and there are no new products to stimulate growth in the near future.
Instead of $ 2600, Tesla is much more likely to be under $ 100 in five years. Instead, buy some other shares for your portfolio.
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Brett Shafer has no position in any of the mentioned shares. Motley Fool has positions and recommends Tesla. Motley Fool has a policy of disclosure.
Katie Wood predicts that Tesla’s shares will reach $ 2600 in 5 years. Here’s what is much more likely to happen. Originally published by Motley Fool
