Should You Buy Tesla Stock Before It’s Worth $2 Trillion?

Wedbush analyst Dan Ives, one of the few Tesla (TSLA) stock bulls on Wall Street, is out today with a new note asserting that the electric vehicle (EV) giant is headed for a $2 trillion valuation sooner rather than later. Under a favorable Trump administration - and with the company’s artificial intelligence (AI) and autonomous driving technology worth $1 trillion alone, in the analyst’s view - Ives sees a $2T market cap on the horizon for TSLA stock within the next 18 months.

“We also believe a potential AI Czar position being created will be important and help drive some of the key broader AI initiatives for the tech world over the coming years,” Ives wrote. “We fully expect under a Trump White House, those initiatives will now get fast tracked as the federal regulatory spiderweb that Musk & Co have encountered over the past few years clears significantly under a new Trump era.” 

Tesla is up 1.6% today to trade around $338. Now up 144% from its April lows, the company's market capitalization stands at approximately $1.06 trillion, with a one-year return of 39.2%. In comparison, its legacy competitors Ford (F) and General Motors (GM) have market capitalizations of $44.1 billion and $61.02 billion, respectively, with one-year returns of 5.4% and 76.2%.

Tesla's forward adjusted price-to-earnings (P/E) ratio is 134.31, which is significantly higher than the industry average, indicating a premium valuation. The price-to-sales (P/S) ratio is 10.69, underscoring TSLA stock’s high valuation relative to its peers - as well as its own historical average multiples. This suggests that the market is already pricing in significant future growth, which poses a downside risk if Tesla fails to meet expectations. 

And as today’s Wedbush note indicates, quite a bit of Tesla’s current valuation is related to optimism over its anticipated AI initiatives and future self-driving potential, as opposed to its current core EV business. Likewise, RBC Capital recently reiterated its "Buy" rating for Tesla, highlighting momentum in its robotaxi and AI projects as key drivers for future growth. 

Tesla's strategy to implement a full self-driving system without lidar is seen as both a risk and an opportunity. While it could potentially lead to substantial value creation through a future robotaxi service, incidents related to its Full Self Driving (FSD) have also attracted increased regulatory attention. 

Wedbush’s Ives rates TSLA at “Outperform” with a $400 price target, but most experts on Wall Street are quite a bit more circumspect. The consensus opinion among 38 analysts in coverage is a “Hold,” with the mean price target of $229.59 representing a discount to current prices.

Overall, while Tesla remains a strong contender in the AI and autonomous vehicle sectors, the competitive landscape is intensifying with the recent Pony AI (PONY) IPO, and investors should carefully consider the company’s outlook and their own appetite for risk before investing at these levels.