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Exclusive Story Is Tesla Overvalued? 2 Reasons It Might Be a BargainReported by Sam Quirke. Published: 12/17/2025. 
Key Takeaways- Tesla is starting to break out toward fresh highs as momentum accelerates into year-end.
- Its P/E ratio has also been running hot, and is now at levels that would worry investors in most other stocks.
- However, both the price action and ongoing analyst support suggest the stock is a bargain right now.
Shares of Tesla Inc. (NASDAQ: TSLA) closed at their highest level in almost a year on Dec. 16, extending a powerful rally that has picked up pace in recent weeks. The stock is now up nearly 120% since April and roughly 25% since late November, with the most recent surge driven by renewed excitement around its expanding robotaxi ambitions. As Tesla pushes through a long-standing layer of resistance and edges closer to blue-sky territory, its valuation has risen just as sharply. The stock's price-to-earnings (P/E) ratio now sits around 317 — its highest level in four years. For most companies, that would be a big red warning sign, especially after its most recent earnings report missed expectations. As is often the case with Tesla, however, the picture is more nuanced. Heading into the final few weeks of the year, there are several reasons to still consider it cheap. A Valuation That Looks Extreme on PaperWhile market uncertainty could send some of America's most popular stocks crashing down even further in 2026 …
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To learn their names and ticker symbols for FREE … Click here NOW — before it's too late. For starters, there's no getting around its bubbly valuation. A P/E ratio north of 300 places Tesla in territory that traditional value investors will struggle to justify, particularly given ongoing pressure on automotive margins, uneven delivery growth, and signs of weakening demand in Europe. However, Tesla has rarely played by the usual rules and has developed a long-standing reputation for behaving more like a tech company than a traditional automaker. Its shares have historically commanded a premium well beyond what investors pay for peers, because few, if any, can match Tesla's ability to disrupt. It would be easy to dismiss this as another company that talks a big game but falters on execution. The thing is, Tesla has repeatedly shown it can walk the walk. Take last weekend's robotaxi update, for example. CEO Elon Musk confirmed in a post on X that "testing is underway with no occupants in the car, giving investors arguably the biggest sign yet that the company is on track to nail its robotaxi ambitions." Reason #1: New Highs Tend to Precede Even More New HighsThe first reason to still consider Tesla cheap is technical. As a general rule, when a stock hits a meaningful high, it often follows that move with several more. So for Tesla, which just surged to a high of $490 on Dec. 16, that breakout could easily be the first in a new string of record-setting moves. This pattern has played out multiple times in the past, most notably in 2020, 2021, and 2024. While the $490 level had been a tough barrier to clear—and one that bears vigorously defended for months—Tesla's push through it now signals a meaningful shift in momentum. If there were ever a moment for Tesla to break free and extend higher, it's this one. Reason #2: Analysts Continue to See Massive UpsideThe second reason to still consider Tesla a cheap stock, despite its triple-digit P/E ratio, is the strength of analyst conviction. This is something we've highlighted several times this year, and it continues to be a key pillar of the bullish thesis. One advantage for investors is that analysts who cover Tesla are quick to reiterate bullish ratings and raise price targets when the stock starts moving. With other companies, analysts might take a more measured approach—or let a rating slip to Neutral until fundamentals clearly catch up. Not so with Tesla. By mid-December, several bullish updates had already rolled in, pointing Tesla shares toward new highs. Stifel Nicolaus, for example, raised its price target to $508. Momentum continued this week, with Mizuho boosting its target to $530 on Dec. 16. A day earlier, on Dec. 15, Wedbush reiterated its bullish rating and a Street-high $600 price target, which still implies roughly 25% upside from current levels. A P/E ratio north of 300 will always raise eyebrows, but when multiple analysts are calling for as much as another 25% in upside, it's hard not to think these prices may one day be viewed as a bargain.
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