Tesla’s stock (TSLA) is crashing by as much as 8% today. CEO Elon Musk predicted that the stock would get crushed “like a soufflé being smashed by a sledgehammer” if it didn’t show profit growth, which is what is happening now.
As we reported earlier this month, if Tesla stock doesn’t crash this quarter, Tesla will likely be trading at a 500+ P/E after reporting Q1 2025 earnings. The last time Tesla traded at these levels, Musk warned Tesla employees that the stock would get crushed “like a soufflé being smashed by a sledgehammer” if it didn’t show profit growth.
It looks like the market is finally catching up as Tesla’s stock crashed 8% today:
The automaker’s valuation has now dipped back below $1 trillion.
Some media are linking the crash to Tesla’s sales in Europe, but it has been clear for weeks that sales are down roughly 50% in the market so far.
On the positive side, Tesla launched a new FSD update in China today. The automaker will likely use that to justify the recognition of some deferred revenue, but it’s not all positive, as the update has been received with mixed reviews.
Electrek’s Take
I think the main factor impacting Tesla’s stock is the anticipation of reduced earnings expectations. Even with today’s 8% crash, Tesla’s stock is still trading at a price-to-earnings ratio of around 150, and that’s with the Bitcoin gain last quarter.
If Tesla doesn’t crash more this quarter, with expected reduced earnings in Q1 due to much lower deliveries, it would likely shoot back up to a P/E of 300+.
In comparison, an automaker like Toyota trades at a P/E of 7, and a technology company like Meta trades at a P/E of 40.
These insane price-to-earnings ratios basically never hold, but they certainly don’t hold when earnings are going down, which is what is happening with Tesla:
As you can see from this chart, the stock seems to only be starting to realize that it’s disconnected from its earnings, and it still has quite a bit of catching up to do.
I never thought I’d find myself cheering for Tesla’s stock to continue crashing, but I feel like it’s the only way to save the company now, as the board and shareholders don’t care about anything else. Tesla’s stock crashing is the only way to get them to care about removing Elon Musk.
I expect the stock to continue to crash in the coming weeks as analysts adjust their delivery expectations and then their earnings expectations for Q1. The consensus appear to still be over 400,000 deliveries in Q1, but it looks like it could be below that.
Shareholders are hoping that Tesla’s planned launch of a robotaxi fleet in Austin in June will turn things around for the stock, but as I previously reported, that’s a “moving of the goal post” strategy by Elon – although it’s likely that large parts of the market don’t realize it.
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