Last year, some wind was taken out of the sails of Tesla (NASDAQ:TSLA) stock. After several years of explosive share price gains, the price is down on a 12-month basis. But with recent events including the highly anticipated robot unveiling, I'm eager to see what experts think about growth prospects over the next few years.
Looking at the numbers
To get a feel for how a stock might grow, I can look at forecast earnings per share. Generally, the stock price trades on a lot of recent gains. Currently, Tesla's price-to-earnings (P/E) ratio is 62. So even though this fluctuates over time, I can look at the EPS forecast and then be able to estimate the price.
EPS for 2023 was $3.12. This will be made public in early 2024. So the 2024 figure will come out at the beginning of 2025 and so on. From a group of 36 analysts, the EPS estimate for 2024 is estimated at $2.28. By 2025 this jumps to $3.03.
Based on the $3.12 from last year, I see that the growth forecast is actually negative this year, before converging next year. To some extent this makes sense. Business delivery numbers for Q1 and Q2 fell year over year, the first time this has happened in nearly a decade. Q3 numbers were better, but there are concerns that competitors are catching up to Tesla and eating away at market share.
From revenue to share price
Assuming the P/E ratio remains the same, it would indicate next year's price target of $141. This would be a significant drop from the current price of $220. However, I have to take this prediction with a grain of salt.
Predictions do not match reality. Tesla could do well to finish this year, causing earnings expectations to rise. Furthermore, trying to predict a company's performance in 2025 and beyond is very difficult to do right now.
On Wednesday (October 23) we get the Q3 financial results, which I think will be a key event for stock guidance through the end of the year. This will not only have an impact on earnings, but it can be a good emotional driver as well. Put another way, a happy report may trigger a meeting even if it is not directly related to benefits. Discussing new production facilities, product launches, partnerships or other factors can influence things.
A closer look
On paper, the current growth forecast for Tesla shares does not look good. However, I will still keep the stock on my watch list, especially with the earnings report coming later this week. If expectations change materially in the coming months, it's definitely a stock I'd consider owning in the future.
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