Cathie Wood of Ark Invest has made a bold prediction regarding Tesla’s stock value, suggesting it could reach $2,600 within five years. This potential increase represents more than ten times its current value, approximately $240 per share, and could elevate Tesla’s market capitalization close to $10 trillion, assuming no share dilution.
However, this optimistic outlook appears to clash with Tesla’s recent performance indicators. The company, recognized for manufacturing and selling electric vehicles, particularly its Model 3 and Y lines, has experienced slowing sales and declining deliveries. Observers note that Cathie Wood’s prediction might eventually prove inaccurate, as Tesla has been grappling with these challenges.
Tesla’s first-quarter deliveries in 2025 fell to 337,000, marking a 13% decrease year-over-year and representing the lowest delivery figures since the second quarter of 2022. The demand for Tesla’s electric vehicles seems to be diminishing due to intensifying global competition and ongoing boycotts of Elon Musk’s products. Concurrently, Tesla has significantly reduced its average sales prices, contributing to pressure on revenues.
Additionally, Tesla has amassed an inventory surplus, producing 26,000 more vehicles than sold in the first quarter, which poses a potential risk to free cash flow and the company’s cash reserves if the trend persists. Vehicles depreciate over time, thereby further jeopardizing the value of this unsold inventory.
Tesla, once part of the prestigious “Magnificent Seven” with a market cap exceeding $1.5 trillion, currently has a market cap of $770 billion. Meanwhile, new product development appears to be stalled. Despite aspirations of diversifying beyond cars, tangible progress on new offerings like the Optimus Robot, self-driving taxis, artificial intelligence projects, and Semi EV truck has been limited. The Cybertruck, though launched, has struggled with recalls and customer dissatisfaction.
Elon Musk and Tesla’s management have consistently promised new, innovative products to stimulate growth beyond electric vehicles, yet these have not materialized. Expectations for this to change in 2025 remain unfounded, as hope fails to substitute concrete strategy.
Given the current economic climate and prevailing anti-Musk sentiment, some analysts project a further decline in Tesla’s stock. Over the past two years, the company’s revenue has stagnated around $100 billion, with first-quarter data suggesting an imminent major sales contraction. Profits are also decreasing, with a net income of $7 billion in 2024, which is anticipated to fall further in 2025.
With a price-to-earnings ratio (P/E) of 117 against a $770 billion market cap, Tesla’s valuation appears significantly overstated, particularly if earnings decline as expected. Comparatively, a more fitting P/E ratio for a low-growth entity in a capital-intensive, cyclical industry like Tesla’s would be 10, aligning its stock price closer to $26, akin to its industry peers.
Consequently, some analysts argue that Tesla’s current financial fundamentals point towards the likelihood of a stock price descending to a reasonable level around $26, rather than reaching Cathie Wood’s $2,600 target, suggesting that such expectations may be overly optimistic and could lead to investor disappointment.
