Morningstar’s metrics for Tesla

  • Fair Value Estimate: $250.00
  • Morningstar Rating: ★★★
  • Morningstar Economic Moat Rating: Narrow
  • Morningstar Uncertainty Rating: Very High

US President Donald Trump announced 25% tariffs on automobiles and auto parts. The tariff applies only to the value of content made outside the United States. Tesla TSLA shares were up slightly on the news.

Why it matters: Tariffs will likely raise auto prices for consumers as automakers pass along increased costs. Tesla should see less impact from this specific announcement, as the company domestically manufactures nearly all its autos sold in the US.

  • However, Tesla is not immune to tariffs. The company does source auto parts (including raw materials, such as steel and aluminum) from countries subject to tariffs, which will raise the cost to produce its vehicles.

The bottom line: We maintain our fair value estimate of $250 per share for Tesla. At current prices, we view the stock as fairly valued.

  • We view the latest tariff news as slightly positive for Tesla, as it will likely raise costs for the firm’s competitors by a larger amount. If all automakers raised prices to offset higher costs, Tesla would see less of a price increase, which could result in higher sales volumes.
  • While this would help Tesla, it supports our view that the company will see deliveries begin to grow in the second half of the year. However, we still forecast deliveries will slightly decline in 2025, as we expect a first-quarter decline will not be fully offset by second-half growth.

Coming up: Tesla is set to report its first-quarter deliveries next week. Through the first two months of the year, deliveries are down in Tesla’s three key markets: the US, China, and Europe. We attribute much of the decline to consumers waiting for the new Model Y and its more affordable 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.