Elon Musk believes Tesla's value will be more than just Nvidia. Is it time to finally buy stocks?

Elon Musk likes to make bold claims. Some of these claims come true, but many do not. Recently, he said he believed Tesla (NASDAQ: TSLA) One day, it may be the most valuable company in the world, claiming that it may be worth more than the combined value of the following five companies in the market capitalization. Today, these stocks Nvidia It has a market value of more than $100 trillion.

Tesla has a market capitalization of less than $900 billion, meaning Elon Musk claims Tesla has a chance to rise about 10 times from its price here. Is he right? Should you buy Tesla stock today? Let's further study Musk's claims and find out.

After years of growth, Tesla's automotive business has been fixed in the past few quarters. In the first quarter of this year, delivery years to customers fell 13% year-on-year to 337,000, while competitors accounted for one share around the world. Automobile revenue fell 20% year-on-year, and the speed faster than delivery has dropped as Tesla implemented a huge price cut on its models. The new Sebert-style vehicle has been a major failure and will not bring huge sales to the company anytime soon.

Profit margins have fallen by 7.4% over the past 12 months, resulting in a huge revenue capacity of Tesla. If delivery continues to fall at lower sales prices, Tesla will struggle to maintain profit margins for the rest of the year. The company does not have long-term guidance for 2025, but all forward indicators say the decline in sales will continue throughout the year. Sales have been in China, Europe and the United States, which is Tesla's largest market.

With no new models, at least disclosed publicly from management - it will be difficult to draw a beautiful picture of Tesla's automotive business in the future. Maybe it could make money from new Cybercab and self-driving car technology, but that's the theory that Tesla has been promising for years. It has never deployed Robotaxi, and its competitor Waymo now performs 250,000 rides per week.

Is it beneficial for Tesla to reach a market value of $10 trillion? This seems unlikely.

A person who charges Tesla.
A person who charges Tesla.

Currently, Elon Musk's optimism about Tesla comes from the potential of Tesla Optimus, the humanoid robot the company is developing. He believes that if these robots have artificial intelligence (AI) software and can perform physical tasks for humans, there will be a market with $10 trillion in revenue and 100 million robots sold for $100,000. That's not a typo.

While $10 trillion in revenue may sound exciting, these are fantastic claims from Tesla leaders. Tesla has never built a normal humanoid robot. The robot's demonstration is remotely controlled by humans. If it could get a working robot, it would be hard to imagine a million units a year, let alone 100 million units. If they made it first, only so many companies and wealthy people would buy these robots every year.

Of course, Musk can claim his character is optimistic based on his own wishes. This does not mean that these numbers are based on economic reality.

TSLA PE comparison
YCHARTS TSLA PE ratio data

Tesla investors are slowly realizing the hard fact: stocks have been overvalued for years. It will be trading at less than $300 in early 2021. Today, it trades below this level for around $275 and may still be overvalued.

The price ratio (p/e) of Tesla stock trading is 150. Typical car stocks will bring P/E ratios close to 10 (I've used Toyota Motors In the chart above, due to trades within most ranges). Remember, Tesla's current annual auto revenue is down 20% annually, with poor forward-looking indicators.

Management and Optimus Robot management are promising, but none of these are real businesses. It would be cool if the company could innovate and launch it, but that doesn't mean that stocks are cheap today.

Even if the stock falls, Elon Musk said Tesla may one day have a market value of 10 times worth, which doesn't mean you should buy stocks. When you peel off the layers of this onion layer, all I see is the auto business deal that struggles with expensive price-to-earnings ratios. Stay away from Tesla stock until further notice.

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Brett Schafer has no position in any of the stocks mentioned. Motley fool has a place and recommends Nvidia and Tesla. Motley Fool has a disclosure policy.

Elon Musk believes Tesla's value will be more than just Nvidia. Is it time to finally buy stocks? Originally published by Motley Fool