Where Will Tesla Be in 5 Years?
Key Points
Based on the stock’s immediate reaction, Tesla's Cybercab launch on Sept. 3 failed to impress investors.
When it comes to robotaxi and humanoid robotics, the timing and magnitude of the potential financial impact are complete unknowns.
The EV stock’s nosebleed valuation, reflective of rosy expectations, sets prospective investors up for subpar performance.
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In typical fashion, Tesla (NASDAQ: TSLA) has been an extremely volatile stock to own in the past five years. During this time, the share price fell at least 30% on three separate occasions.
But unlike historical trends, this electric vehicle (EV) stock has underperformed the S&P 500 index over the trailing half decade. It's up only 54% during this time (as of Sept. 4), while the benchmark has climbed 71%.
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This business continues to live in the spotlight, which will certainly result in persistently heightened volatility for investors to deal with. Where will Tesla be in five years?
Image source: The Motley Fool.
Dreams are better than reality
On Sept. 3, Tesla held an invite-only event launching its much-hyped Cybercab vehicle. The car design, which comes with no pedals and no steering wheel, was revealed nearly two years ago in October 2024. However, the company finally introduced a small number of Cybercabs to its Austin robotaxi fleet. There are 250 vehicles in the total robotaxi fleet (also including model Y's) that Tesla operates both in Texas and Florida.
As of this writing on the morning of Sept. 4 just after the market open, shares are down 6%. Investors initially appear to be disappointed by this news.
The latest event perfectly highlights what being a Tesla shareholder feels like. So far, the business has been defined not by its current operations, but by the possibility of outsized success in the future. New product or service announcements need to wow the followers. When they don't, there can be volatility.
Even though the stock has lagged the broader index in the past five years, the company sports a $1.1 trillion market capitalization, making it one of the most valuable enterprises on Earth. The market values shares based mostly on the narrative. For Tesla, the dreams of what it could become hold more weight than the reality on the ground.
But this can only last for as long as the market remains patient. The stock's dip might be an early warning that the investment community wants tangible results sooner rather than later.
Driving uphill on a steep road
Let's assume that in five years, Tesla shows notable progress in its two most important areas: robotaxi and humanoid robotics. For the robotaxi, this means expanding into many more markets across the country and even internationally. For the humanoid robotics, it means increasing production capacity, selling to enterprise customers, and possibly selling to consumers as well.
I believe Tesla bulls would view this outcome favorably. This optimistic scenario, though, might fail to lift the stock enough to outperform the S&P 500 index.
Of Tesla's $28.2 billion in second-quarter revenue, virtually nothing comes from robotaxi and robotics. I'd bet that in five years, the majority of the company's sales will still come from EVs. Even with technological progress being made, which is what the market wants, it could be some time until these ambitious projects move the financial needle in a meaningful way.
History says that this is the case with Tesla. The market is captivated by the story. But reaching milestones takes longer than expected.
This "Magnificent Seven" stock currently trades at around $353. According to consensus analyst estimates, Tesla will report earnings per share of $1.77 this year. Assuming this figure rises to $8.85 in 2031, a 400% gain, shares still trade today at a steep valuation of 40 times that extremely rosy forecast five years from now. Skyrocketing profits aren't enough.
Not even the smartest analysts can confidently predict what this business will look like in the future, adding tremendous uncertainty. Tesla could end up making good on all its promises. However, the timing and magnitude of the financial impact is a huge unknown. And the valuation shows that the stock is priced for perfection.
Investors who buy Tesla shares today shouldn't be surprised if the return disappoints between now and 2031.
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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.
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