Tesla's $770 Share Price: Still Overpriced but Less So Than Market Thinks

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  Published in Stocks and Investing on Monday, November 24th 2025 at 4:21 GMT by The Motley Fool

When the Price Drops: Why I’d Buy Tesla Now

The Motley Fool’s November 24, 2025 feature “I Would Buy Tesla Stock at This Price” takes readers through a careful, data‑driven argument that the electric‑vehicle titan is still overpriced, but not by as much as the market has made out it is. The author—an anonymous contributor with a reputation for thoughtful value‑orientation—opens by framing the discussion in a familiar investor’s playbook: “The first thing you look for is the entry point.” He then walks through a series of metrics, contextual benchmarks, and industry narratives that together paint a picture of a company that is still over the road to profitability and a few years away from hitting the valuation multiples its peers demand.

1. The Current Valuation Landscape

Tesla’s share price, at the time of writing, sat around $770. The author immediately points out that this sits a full 3.2 times above the company’s 2024 average Price‑to‑Sales ratio of 3.0 and 3.8 times above the Price‑to‑Earnings average of 27. He notes that Tesla’s 2025 consensus earnings estimate is roughly $4.45 per share, which translates into a P/E of $172—well above the S&P 500 EV/EV average of 35.

In addition to the headline ratios, the article references a Bloomberg chart (linked in the original piece) that shows Tesla’s EV/EBITDA hovering at 22x—a number that many value investors would flag as unsustainably high given the company’s current cash burn rate. The article also pulls a data table from Tesla’s latest quarterly earnings release, showing revenue growth of 45% YoY but a gross margin that only rose from 21.4% to 22.3% in the past year.

2. Where the “Buy” Price Comes From

The author’s suggested purchase price is $700 per share—a target that would represent a 9% discount to the current market level. He justifies this number through a back‑of‑the‑envelope calculation that blends two scenarios:

1. Revenue‑Driven Upside: If Tesla can achieve a $28.5B revenue in 2026 (a 28% YoY growth from 2025’s $22.3B) and push its gross margin to 28%, the company’s earnings before interest and taxes (EBIT) would climb to $4.4B. Using a 35x EV/EBITDA multiple—consistent with the automotive sector’s high‑growth peers—places the valuation at $700 per share.
2. Margin‑Only Upside: Even if revenue growth stalls, a modest improvement of the margin from 22% to 24% would raise EBIT to $3.5B. At a 30x multiple, the price target nudges up to $750.

The article emphasizes that the $700 number is not a strict “stop‑loss” threshold but a “floor” under which the author would be confident buying, given the company’s historical volatility and the risk premium it carries.

3. The Catalysts and Risks

The feature goes on to discuss a handful of catalysts that could push Tesla’s price toward the suggested target:

• Battery Technology Leap: A new partnership with Panasonic announced in early 2025 has already begun producing 50 kWh cells at a lower cost per watt. The article links to an interview with Tesla’s battery chief, highlighting how this could shave $150 from the cost of a Model 3 per year.
• Gigafactory Expansion: The author cites the official Tesla press release on the opening of a new Gigafactory in Texas, which will allow the company to increase production capacity by an estimated 500,000 units per year.
• Regulatory Support: The article links to a Washington Post piece that details the U.S. Treasury’s upcoming $20B EV incentive package, including a new tax credit for battery storage systems. Tesla’s energy storage division, Megapack, stands to gain significantly.

However, the piece is careful to also outline the risks:

• Competition: The author lists rivals such as Lucid, Rivian, and BYD as potential threats that could erode Tesla’s premium on both vehicles and energy products.
• Supply Chain Disruptions: A reference to a CNBC analysis warns that a recent chip shortage could hit production timelines for Model 3s and Model Y’s.
• Management Turnover: While not a major focus, the article does mention that Elon Musk’s rumored shift toward a “hands‑off” role could create uncertainty among long‑term shareholders.

4. Contextualizing Tesla Within the Industry

A particularly helpful section of the article is the comparison table that places Tesla side‑by‑side with other large-cap auto manufacturers. The author pulls data from Yahoo Finance to show that Tesla’s Free Cash Flow Yield is -12%, while its competitors—Ford, GM, and Toyota—are hovering around -2% to -3%. The author points out that Tesla’s negative free cash flow is partly due to its aggressive reinvestment strategy, a point he stresses is not a sign of financial distress but rather a “growth engine.”

He also references an academic paper on EV adoption that highlights the high marginal cost of EVs falling due to battery cost reductions. By linking to that paper, the article gives readers an academic underpinning for why Tesla’s cost curve could be a major source of future upside.

5. Practical Advice for Investors

The conclusion of the article offers practical “how‑to” advice for readers who decide to act:

1. Dollar‑Cost Averaging: Instead of buying the entire $700 target at once, spread purchases over 12–18 months. The article links to a Investopedia guide on DCA for beginners.
2. Fractional Shares: The author recommends using brokerages that support fractional shares (e.g., Robinhood or Fidelity) so you can invest $1,000 even if the stock is near $770.
3. Stop‑Loss: Set a stop‑loss at $640 (roughly 15% below the purchase target) to protect against a prolonged market downturn.

Final Takeaway

“Tesla is still a risky bet,” the author writes, “but the price you’ll get to purchase it at has slipped far enough that the upside‑to‑risk ratio becomes compelling.” By combining a careful look at financial metrics, forward‑looking catalysts, and a disciplined buying strategy, the article offers a comprehensive roadmap for readers who are curious about Tesla’s future and who may be ready to “buy the dip.” The piece is an excellent primer for anyone looking to understand why an otherwise overpriced stock could still present a good entry point, provided the market eventually acknowledges the company’s growth potential and margins improvement.