Tesla needs to show a clear future

future

Tesla is always one of those companies you cant avoid, and the week ahead may include more chatter about the company and Elon Musk, its mercurial CEO, than many investors can stand.

The market will most likely open higher on Monday. Futures trading on Sunday suggested the Dow Jones Industrial Average and the Nasdaq Composite will open up 100 points. The gains seem to be coming after the stock market recovered Friday from heavy selling the day before related to banking issues.

For the week, the Standard Poors 500 Index rose 1.7%, while the Nasdaq was up 2.1%., The Dow closed ahead 1.6%. The huge rally erupted in April seems intact, but consumer stresses and frustration about slowing job growth could become a problem.

Tesla claims the limelight

Tesla, the electric-vehicle maker, reports third-quarter earnings after Wednesdays market close, and Tesla is the only company of 452 reporting this week with a market capitalization greater than $1 trillion about $1.5 trillion, in fact.

So, yes, people will pay attention to the earnings report, to the state of the electric vehicle market place and, of course, to Musks promise that Teslas Robotaxi will come to dominate the world.

The EV market is struggling, however, because of Trump Administration hostility and many buyers not able to afford the price.

Tesla shares also have been whipsawed by criticisms of Musks involvement in the Trump Administration. The shares fell 54.5% between a December 2024 peak and its bottom in April. Tesla closed Friday at $439.91, up 105% from its April low.

The Street is estimating Tesla revenue at $26.5 billion, up 5.3%. Earnings may come in at 50 cents share down 50%.

Tesla was up 6.24% on the week, second-highest among stocks in the so-called Magnificent Seven group. The shares are off 1.2% so far in October.

The question that needs to be asked if Tesla deserves its stock price and that trillion-dollarmarket cap. The stock price is 135 times the companys 12-month forward price-earnings ratio. (That is, the p/e ratio using expected earnings.) That is a rich valuation. The forward p/e ratio on the SP 500 is just 24 times earnings.

If you listen to Musk and fans of the company and of its stock, the answer may be yes. Not because Tesla vehicles are selling like hotcakes. They face headwinds from increasing competition and the end of tax credits that helped fuel sales of electric vehicles in the United States.

Rather, Musk insists theres greater potential in Robotaxi its self-driving ride service.

The Robotaxi, the argument posits, will take over urban transportation. Its available now in Los Angeles, Phoenix, San Francisco, Austin and Atlanta. However, Waymo, its top competitor developed by Alphabets Google, is already available in these markets.

Two other issues surrounding Tesla:

What is the guidance for sales going forward? Tesla delivered 497,000 vehicles in the third quarter, up 7.4% from a year ago. But many of those sales came from buyers who wanted the $7,500 EV tax credits.

The status of Musks employment contract. A version approved this year is potentially trillions of dollars in shares. An earlier version was vacated by a Delaware court as deeply flawed because the process was dominated by Musk and the board its responsibilities to shareholders.