Tesla P/E Hits 400: 2 Reasons It's Still a Buy, 1 to Avoid

With Q4 earnings now well and truly digested, investors are watching closely to see how Tesla Inc (NASDAQ: TSLA) shares behave through the first week of February.

Yes, the company topped analyst expectations on both revenue and earnings, but that success came with a catch. The stock exited its latest earnings report with an even higher valuation than before, with its price-to-earnings (P/E) ratio now around 400.

That leaves Tesla, despite delivering a decent report, in an uncomfortable position heading into Q1, with the stock finely balanced between strong long-term belief and mounting short-term skepticism. On one side are the bulls willing to look past valuation and trust the company’s ability to execute.

On the other hand are the bears who see a multiple this frothy as an accident waiting to happen.

For now, at least, the balance is leaning slightly in the bulls’ favor. Let’s explore the two reasons Tesla is still a buy, and one reason why investors may want to stay away.

Reason #1 It’s Still a Buy: The Uptrend Is Still Intact

The strongest argument for staying constructive on Tesla is simple—price action. The long-term uptrend that began last spring is still intact, even after a few weeks’ worth of chop. 

The $420 area where the stock sits now matters enormously. Bulls have been forced to defend this level several times this year, and so far have managed to do so. As long as Tesla holds above this zone, the broader structure remains constructive, with higher lows still underpinning the chart. From a technical perspective, this gives the stock a legitimate path back toward the $500 region, where it briefly tagged an all-time high in December.

That upside is far from guaranteed, however, especially with the inflated valuation. It will require consistent execution from Tesla’s leadership and an increasing belief in the company’s long-term potential from the bulls. 

Reason #2 It’s Still a Buy: Analysts Are Still Backing the Story

Despite the valuation concerns, analyst sentiment remains more supportive than many might expect.

Over the past week alone, several teams have reiterated their Buy or equivalent ratings on Tesla, giving a firm vote of confidence on the company’s ability to keep growing. 

Supportive voices include those from Deutsche Bank, Canaccord Genuity, and Piper Sandler. Each of these maintained positive stances following earnings and gave refreshed price targets that ranged as high as $520, implying roughly 25% upside from current levels.

The common thread in these bullish takes is confidence in Tesla’s ability to execute, scale, and continue shaping multiple high-growth markets simultaneously.

Analysts are effectively backing Tesla to remain that rare kind of company that’s capable of justifying extreme multiples for longer than seems rational.

1 Reason to Stay Away: A 400 P/E Is Playing With Dynamite

Now for the reality check. A post-earnings P/E ratio around 400 is not just expensive, it’s unforgiving. At this valuation, even small disappointments or slightly negative updates could trigger a violent sell-off, and market sentiment can often lead ahead of any material shift in fundamentals.

There is no shortage of skeptics pointing this out. Phillip Securities recently set a price target of $215, and that wasn’t even the most bearish—JPMorgan's $145 target calls for a drop of more than 65% from current levels.

These bearish views hinge on a simple premise: no company, regardless of quality, should trade at this kind of multiple without perfection, and Tesla is far from perfect. With competition increasing, delivery numbers falling, and a CEO who loves to court controversy, they feel there are easier ways to make a buck than buying into a stock priced like this. No matter how you look at it, that risk is real. Investors will need to decide on Tesla based on their own appetite for risk and reward.

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The article "Tesla P/E Hits 400: 2 Reasons It's Still a Buy, 1 to Avoid" first appeared on MarketBeat.