CEO Elon Musk Says Tesla Could Be Worth More Than the World's 5 Largest Companies. Is the Stock a Buy?

Tesla (NASDAQ: TSLA) shares initially shrugged off a weak earnings report before the stock got caught in the trade-war sell-off. The electric vehicle (EV) maker had a tough year in 2024, although Chief Executive Officer Elon Musk continues to be very upbeat about the future. This includes the company's latest earnings call, when he said that Tesla stock could be worth more in the future than the world's next five largest companies combined.

Let's take a closer look at Tesla's most recent results to see if the stock is worth buying.

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Soft automotive sales

For Q4, Tesla's revenue edged up 2% year over year to $25.7 billion. Adjusted earnings per share (EPS), meanwhile, rose 3% to $0.73, while adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) climbed 25% to $4.9 billion. The profitability metrics were hurt by a 9% jump in operating expenses and a 138 basis point narrowing in gross margin from 17.6% to 16.3%.

Tesla's results missed analyst expectations on both the top and bottom lines. Analysts were looking for an EPS of $0.76 and revenue of $27.3 billion, as compiled by LSEG.

Automotive revenue sank 8% to $19.8 billion, while Model 3/Y deliveries increased by 2% to 422,405 vehicles. Other models, including its Cybertruck, saw deliveries rise by 3% to 23,640 vehicles.

Total vehicle production in the quarter, meanwhile, fell 7% to 459,445. Model 3/Y production declined by 8%, while other model production increased by 25%.

The weak numbers come despite Tesla offering a number of promotions in the quarter. In North America, it offered discounts for customers referred by other Tesla customers, while in China, it lowered the price of its Model Y SUV ahead of the launch of its Model Y Juniper.

On the positive side, the company said it continues to drive down the cost of making its vehicles. It said in Q4 that costs reached the lowest level ever, coming in below $35,000 per vehicle.

Outside of autos, the company's other businesses performed well. Its energy generation and storage segment revenue more than doubled to nearly $3.1 billion, while service and other revenue jumped 31% to $2.8 billion. Both Megapack and Powerwall had record deployments of 11.0 GWh combined in the quarter, leading to a record in gross profit for the segment. Service revenue, meanwhile, was helped as the company added 3,000 new stalls to its Supercharging network.

Looking ahead, Tesla did not provide any official forecasts for 2025. However, Musk said that he expects the automobile business to return to growth in 2025. He added that Tesla will be launching unsupervised full self-driving as a paid service in Austin, Texas, in June and expects to be operating unsupervised driving with its internal fleet in several cities by the end of the year. In addition, Musk said that automakers have been interested in licensing its technology.

Musk also continues to promote Tesla's Optimus humanoid robot, saying the plan is to build 10,000 Optimus robots by year-end while adding they will be doing "useful things."

In keeping with his promotional nature, Musk said there was a path by which Tesla could be worth more than the next top five companies by market cap combined. Tesla was the seventh largest company in the S&P 500 at year-end. This result seems very unlikely, in my view.

Image source: Getty Images.

Is it time to buy the stock?

At this point, Tesla is trying really hard to get investors' focus away from its EV business, mainly because of its mediocre performance. The company has long portrayed itself as a tech company, not an carmaker, but the numbers at this time say that is exactly what it is -- an automobile company.

Tesla had 16.3% gross margins and 6.2% operating margins in Q4, which is much more akin to an auto company than a tech company. By comparison, General Motors (NYSE: GM) had 12% auto gross margin and 6.8% operating margin in 2024. A hardware-based tech company, like Nvidia, meanwhile, had about a 75% gross margin last quarter and a 62% operating margin.

Musk continues to make big promises, and even on Tesla's earnings call, he made fun of the fact that he is basically the boy who called wolf. However, he said there really is a wolf this time with his self-driving car. However, even if the company is getting close to autonomous driving, it is still behind Alphabet's Waymo, which already operates in a number of U.S. cities, and the economic model is still unproven.

From a valuation perspective, Tesla trades at a forward price-to-earnings (P/E) ratio of 98.5 times based on 2025 analyst estimates. That compares to a forward P/E of 5.6 times for Ford (NYSE: F) and 4.2 times for GM.

TSLA PE Ratio (Forward 1y) data by YCharts

At this point, Tesla is not trading based on the fundamentals of its business but on hype and hope. That's not my type of investment, but it has been a very successful strategy for the company for a very long time, and there is nothing that indicates this will end anytime soon. As long as investors buy into Musk's vision, the stock can seemingly continue to trade higher.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Nvidia, and Tesla. The Motley Fool recommends General Motors. The Motley Fool has a disclosure policy.