Tesla TSLA shares were down 15% as the market reacted to an analyst downgrade and market fears that increased competition and CEO Elon Musk's political activities will lead to lower deliveries and profits in 2025. Tesla has lost more than half of its value since December.

Tesla ★★★

  • Fair Value Estimate: $250.00
  • Share Price: $222.15 (as at 11/03/25)
  • Moat Rating: Narrow
  • Uncertainty Rating: Very high
  • Price to Fair Value: 0.88 (Undervalued)

 Why it matters: Tesla's primary business is selling autos. While management's long-term vision is to transition to robotics, autonomous driving software, and ride-hailing, we expect autos will remain the primary business through at least the rest of the decade.

  • In Tesla's three key auto markets, the US, China, and Europe, the company faces strong competition in the long-range entry-level luxury electric vehicle market. In the US and Europe, Tesla has historically offered the best combination of range and price, but other brands are now comparable.
  • CEO Elon Musk serves as an advisor to US President Donald Trump, and Musk also actively campaigned for the far-right Alternative for Germany party in recent German elections. These moves risk turning consumers away from Tesla's brand.

The bottom line: We maintain our $250 fair value estimate for narrow-moat Tesla. We view Tesla shares as fairly valued and trading just a little below our fair value estimate and in 3-star territory. We recommend investors wait for a larger margin of safety before considering an entry point.

  • We see elevated risk for Tesla. However, we think it is still too early to conclude Musk's political actions will hurt Tesla sales in 2025. In the US, Wards Intelligence's auto data shows year-over-year sales growth in February. In China, February sales were hit by the timing of the Lunar New Year.
  • We also view the first quarter of 2025 as somewhat of a transition for Tesla. The new Model Y will not be released for most of the quarter in Tesla's key markets. Additionally, Tesla plans to launch its more affordable SUV later in the year, so some consumers could be waiting to buy that vehicle.

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Terms used in this article

Star Rating: Our one- to five-star ratings are guideposts to a broad audience and individuals must consider their own specific investment goals, risk tolerance, and several other factors. A five-star rating means our analysts think the current market price likely represents an excessively pessimistic outlook and that beyond fair risk-adjusted returns are likely over a long timeframe. A one-star rating means our analysts think the market is pricing in an excessively optimistic outlook, limiting upside potential and leaving the investor exposed to capital loss.

Fair Value: Morningstar’s Fair Value estimate results from a detailed projection of a company's future cash flows, resulting from our analysts' independent primary research. Price To Fair Value measures the current market price against estimated Fair Value. If a company’s stock trades at $100 and our analysts believe it is worth $200, the price to fair value ratio would be 0.5. A Price to Fair Value over 1 suggests the share is overvalued.

Moat Rating: An economic moat is a structural feature that allows a firm to sustain excess profits over a long period. Companies with a narrow moat are those we believe are more likely than not to sustain excess returns for at least a decade. For wide-moat companies, we have high confidence that excess returns will persist for 10 years and are likely to persist at least 20 years. To learn more about how to identify companies with an economic moat, read this article by Mark LaMonica.

Uncertainty Rating: Morningstar’s Uncertainty Rating is designed to capture the range of potential outcomes for a company. An investor can think of this as the underlying risk of the business. For higher risk businesses with wider ranges of potential outcomes an investor should consider a larger margin of safety or difference between the estimate of what a share is worth and how much an investor pays. This rating is used to assign the margin of safety required before investing, which in turn explicitly drives our stock star rating system. The Uncertainty Rating is aimed at identifying the confidence we should have in assigning a fair value estimate for a stock. Read more about business risk and margin of safety here.