How Low Can Tesla Stock Still Go?

Tesla (TSLA) investors already lost nearly $700 billion on the stock this year. How much more can this S&P 500 stock drop?

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Following Tesla stock’s 10% plunge Thursday, shares of the electric-auto maker dropped more than 60% this year to 125.35.  That wipes out gains going back to 2020. Tesla stock investors, including Elon Musk himself, are down a massive $667 billion this year.

Tesla is already on some investors’ “avoid” list in the S&P 500.

“This stock was propped up by a stimulus-filled economy that shot its market cap into an extremely lofty trillion valuation and it really was a ‘story’ stock as many rallied behind Musk and the product they have,” said Ken Mahoney, CEO of Mahoney Asset Management. “While certainly Tesla is still an attractive stock over the long term, with Musk selling so heavily and often, and investors seeing him gear his focus toward Twitter, it is to no surprise why it is down about 60% this year.”

But how low can this stock go, really?

Scenario #1 (Most Bullish): Analysts Are Right And Stock Jumps 104%

If you listen to the Wall Street analysts, Tesla stock is one of the biggest bargains in the S&P 500.

The average Wall Street analyst thinks Tesla will trade for 255.68 a share in 12 months. If they’re right, that would signal a 104% rally in the stock. That would make Tesla the third-best performing S&P 500 stock next year after Dish Network (DISH) and Warner Bros. Discovery (WBD). It would also put more than $411 billion back into Tesla investors’ pockets.

Sound too far fetched? At least one computerized AI model thinks Tesla stock is worth even more than that. Trefis, a system that breaks down what a company is worth based on the sum of its parts, says Tesla stock is worth 272 a share. That means it’s due to rally more than 117% — an even more bullish call than analysts. Trefis makes this forecast on the assumption that Tesla’s energy generation and storage business only accounts for 0.5% of the stock’s value.

Scenario #2 (Less Bullish): Tesla Trades Like Apple And Gains 50%

Don’t want to take Wall Street analysts’ word for it? Another way to put a price tag on Tesla is using a PEG ratio similar to Apple (AAPL).

What’s a PEG ratio? It’s a way to value stocks that might have higher P-E ratios because the companies are growing faster than other. The PEG is a stock’s P-E ratio divided by its expected growth rate. The ratio helps you price a stock in a way that accounts for its high growth.

And for Tesla, a good comparison might be Apple. In many ways, Apple has already achieved what Tesla wants. And Apple’s PEG ratio is 2. Applying that same PEG to Tesla yields a stock price of 189.22. If that’s right, it means Tesla stock still has 51% upside. Tesla’s PEG valuation, though, hinges on the company hitting 29.2% average annual growth. Analysts think Tesla’s revenue will rise 54% this year and 38% next year.

Scenario #3 (Negative): Tesla Craters 54% To Match S&P 500

Tesla shares have traded like they’re something special for years. But what if Tesla is just another S&P 500 stock? Bad things.

The S&P 500 is only trading for 17.6 times its earnings in the past 12 months. That’s a fraction of Tesla’s lofty 38.7 P-E. What would happen if Tesla traded like the S&P 500? Get ready for a 54% crash beyond the pain you’ve already seen.

If Tesla trades for just 17.6 times its trailing adjusted profit of $3.24 a share, that means it should actually only be worth 57.02 a share. That’s not far off the lowest 12-month price target of any Wall Street analysts at 85 a share.

Scenario #4 (Scary): Tesla Crashes 86% And It’s Just Another Automaker

What’s the worst outlook for Tesla investors? Ironically for the shares to trade like other U.S.-based automakers.

Ford Motor (F) only trades for 5.1 times its trailing earnings. And General Motors (GM) trades for just 5.9 times. Taking the midpoint of 5.5 and applying it to Tesla’s trailing earnings yields a value of just 17.82, or a devastating 86% discount to Thursday’s price. To be sure, not a single Wall Street analyst sees this happening.

Tesla stock has dropped so much it’s no longer among the top 10 most valuable companies in the S&P 500. The company is only worth $395 billion now. But as the twelfth most-valuable S&P 500 stock, its future still matters.

It’s just the future is very unclear.

How Low Can Tesla Stock Go?

How different forecasts size up Tesla’s outlook versus Thursday’s close of 125.35

Sources: S&P Global Market Intelligence, IBD, * – based on trailing P-E