Tesla’s stock has suffered a steep decline, plummeting 48% since reaching its peak in mid-December, yet longtime investor Ross Gerber still isn’t convinced it’s cheap enough to buy back in.
Gerber, a seasoned Tesla investor who had loaded up on the stock before its meteoric rise, predicted earlier this year that shares could fall by as much as 50%. His foresight has proven accurate, as the stock has continued its downward trajectory, losing another 31% since his late-February forecast.
Despite the sharp drop, Gerber is holding back on re-entering the market. In an interview with Business Insider, he reiterated his belief that Tesla lacks a clear recovery path in 2025, citing multiple challenges including CEO Elon Musk’s divided attention between Tesla and his other ventures—Dogecoin (DOGE), SpaceX, xAI, and X (formerly Twitter).
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Gerber, who leads Gerber Kawasaki Wealth & Investment Management, a firm overseeing approximately $3 billion in assets, has not hesitated to put his words into action. He cut his firm’s Tesla holdings by 31% in 2024, reducing his position to 262,000 shares, valued at $106 million at the close of last year, according to regulatory filings.
Tesla’s Path to Recovery Remains Unclear
Gerber argues that for Tesla to regain momentum, it must significantly increase its earnings. “If I do $5 in earnings, at 50 times earnings, I can get to $250,” he explained. “But they have no path to that.”
Tesla’s earnings per share (EPS) took a significant hit in 2024, plummeting 52% to $2.04. Analysts estimate earnings will rebound to $2.75 per share in 2025 and $3.65 in 2026, but these projections remain uncertain in the face of economic headwinds and declining global sales.
Political Controversies Weigh on Tesla’s Brand
Gerber also sees Musk’s controversial political stances as a lasting headwind for Tesla. He pointed to Musk’s alleged Nazi salute at the presidential inauguration, the CEO’s divisive political rhetoric, and President Donald Trump’s public promise to buy a Tesla to support the brand.
According to Gerber, such polarizing actions have alienated many customers, further dampening the stock’s appeal. “The decline of a stock trading at 150 times earnings is the farthest thing from surprising in my book,” he noted.
Tesla’s Valuation Remains Expensive
Despite the substantial correction, Gerber insists that Tesla is still overvalued. The stock currently trades at a forward price-to-earnings (P/E) ratio of 65—more than triple the valuation multiple of the S&P 500.
“As a traditional investor, it doesn’t fit any valuation system that makes sense compared to any other stock,” Gerber remarked. He contrasted Tesla’s valuation with Nvidia, which trades at a much lower P/E ratio of around 20 times earnings, has projected earnings growth of 75% this year, and is actively buying back stock.
External Market Pressures and Growth Concerns
Broader macroeconomic conditions also weigh on Tesla’s valuation. Investors are increasingly skeptical about the company’s long-term growth prospects as analysts revise vehicle sales estimates downward for the second consecutive year.
The uncertainty surrounding President Trump’s proposed tariffs has added another challenge, pushing investors to demand a lower earnings multiple for Tesla’s stock.
“If Tesla trades at even 50 times forward earnings—which translates to a $290 per share valuation—giving them $3 per share still only gets you to $150,” Gerber explained. “Yet, the stock is still trading at $225, meaning it could have further to fall.”
The Used Car Market Poses Another Challenge
Another significant issue affecting Tesla is the used-car market. Ironically, the very quality that made Tesla vehicles desirable—durability—is now hurting the company. Gerber likened Tesla’s problem to Apple’s, where product longevity reduces the frequency of upgrades.
“Teslas don’t wear out very quickly, so you don’t have a lot of repeat demand,” he said. “A 5-year-old Tesla is just as good as a 2-year-old Tesla.”
This dynamic, combined with the growing number of Tesla owners selling their cars due to Musk’s political controversies, has led to plummeting resale values. The drop in used Tesla prices is creating a situation where prospective buyers have little incentive to purchase new models directly from the company.
“Unless the hardware is significantly better than previous versions, consumers—especially price-conscious ones in an inflationary environment—have no strong reason to upgrade,” Gerber noted. “This hurts Tesla’s new car sales while also eroding the value of its existing vehicles.”
Tesla’s sharp stock decline has left investors questioning its valuation, growth prospects, and the impact of Musk’s broader ambitions on the company’s future. While Gerber was once a strong Tesla bull, he remains skeptical about the stock’s ability to rebound anytime soon. Gerber’s staying on the sidelines—highlights broader concerns that the stock, even after its sharp correction, still isn’t cheap enough for traditional investors.