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Tesla stock investors have been on a roller coaster ride this year in 2025. Actually, to think about it, Tesla stock investors have been on a roller coaster for almost 5 years now as the stock has gone up and down and stayed relatively where it was 5 years ago. It's now trading at $332 a share. That's up from the lows below 250, but down significantly from over 400 where it was to begin the year.
But where will the stock be by the end of next year, by the end of 2026? That's the question I want to answer in this video. I'm going to use several numbers, estimates, and assumptions to make this stock price prediction for Tesla by the end of 2026. And I'm going to share with you exactly where I'm getting all the numbers from, so you can determine for yourself whether the numbers I'm using are too optimistic or too pessimistic or right on point.
But before we get into the heart of the video, I wanted to thank the sponsor of this video, fiscal.ai. They're a data gathering resource, and they save so much time doing and conducting my financial analysis on companies like Tesla and any company you can think of. They have all the data aggregated for you in one place.
It saves so much time. And they have cool charts like this one which measures Tesla's return on invested capital going all the way back to 2016. You can see that phenomenal improvement in Tesla's ROIC between 2017 and 2022 when it soared over 27.7% as the CO 19 pandemic worked in Tesla's favor. Other car manufacturers were constricted.
They couldn't produce as many vehicles. Tesla was able to step in and sell its vehicles to buyers who normally may not have wanted an electric vehicle, but since they couldn't buy anything else, they just looked for cars that were affordable and fit their needs. And Tesla took advantage of that situation very, very well.
But since then, you can see Tesla's return on investor capital has fell considerably, down from 27.7% all the way down to 7.6%. And interestingly in this time Tesla's stock price has also experienced uh lower than expected performance or uh underperformance compared to the S&P 500 index. So this is a very telling number and these are some of the key numbers you can get from access to their services.
So, back to the heart of the video. And one of the numbers I'm going to need to make my Tesla stock price prediction for 2026 is Tesla's earnings per share estimates for 2027. The analysts on Wall Street that are following Tesla stock, they expect the company will deliver $365 in earnings per share in 2027.
I think those numbers are optimistic, but I'm not going to adjust the earnings per share number. I'm going to take them as is. I'm going to uh use this in my analysis. Now, the analyst on Wall Street do expect a huge increase this year. The earnings per share are only expected to be $1.79, down from $248 last year.
As I mentioned and as we saw in the chart, Tesla's return on invested capital is falling. its sales are declining and it's hoping for the driverless car technology to step in in the next few years to help facilitate revenue growth again. And that's what the analysts are expecting the earnings per share to more than double from $1.79 in 2025 up to $3.65 in 2027.
I'm also going to use Tesla's forward price to earnings ratio. Again, I'm getting this data from fiscal AI. Tesla's trading at a forward PE of 171. This is more than eight Tesla shares are trading at a super premium valuation as investors have rushed in to take advantage of the potential of driverless car technology coming in the next few years.
So now that I have the numbers that I need, I can go ahead and make my uh scenario analysis for Tesla shares. So, if the company remains on track to deliver $3.65 in earnings per share for 2027 and the forward PE remains at $171, then Tesla's share price could almost double by the end of next year to $624.
This scenario, I don't think, is very likely. I think what's more likely is Tesla's forward price to earnings ratio will decline. How much it declines remains to be seen, but I think a decline is in order given the company's prospects and given the valuation comparably to other large tech peers, to other AI companies, to other car companies.
Regardless of where you compare Tesla's forward PE multiple, the valuation looks expensive compared to anything and any company. The forward PE if it were to decline to 150 the price could increase but a little bit less to a to $550 a share. If the forward PE were to decline to 100 the stock price would still increase but only to $365 a share.
If the forward PE were to decline to 75. The stock price could decline to $274 per share. So in all these scenarios, I'm forecasting Tesla's forward PE ratio declining. But in only one out of the four scenarios would Tesla's share price actually decline from the current price. And the reason for that is that very very optimistic earnings per share estimate from Wall Street analyst at $3.65.
So they're estimating between now and the end of 2026 or between now and 2027, Tesla's earnings per share more than doubles. And embedded in this estimate is that Tesla will roll out robo taxis and driverless cars uh before the end of 2027 because otherwise just counting on the company's existing business.
I don't think there's a pathway for the company to deliver that much in earnings per share growth more than doubling. Sure, the energy segment is increasing, but that segment is now under trouble because it's the segment that's directly impacted from the tariffs on China. And so, the management team at Tesla said that segment will be directly hit as a result of the tariffs, more so than any other segment.
Furthermore, the new tax cut and spending bill that passed into law here uh in uh the middle of the year removes the $7,500 tax credit for electric vehicle sales. Tesla's EV sales were already declining in the first half of the year by double digits. Uh removing that $7,500 tax credit, I think, will cause a further decline in Tesla's EV sales.
On top of all that, the legislation removes the requirement and there's been removals of those requirements for other car companies to forcibly produce electric vehicles even against their own forecasts for how many are needed uh because they will no longer need to pay other EV companies like Tesla and Tesla's regulatory credit revenue will also decline.
Those are very high margin profits and those will likely decline sooner than expected. So, a lot of headwinds for Tesla's earnings per share and the big tailwind is the driverless car technology. When will it be available? That remains to be seen. They are just now testing this technology in Texas with a safety driver on board and so far there haven't been any disasters which is good news.
um the technology uh is making some errors, but thankfully there haven't been any disasters. And as long as there's no disasters, I think it's positive for Tesla because they can continue testing collecting more data, making regulators feel more comfortable in other cities and other states to allow Tesla to expand their testing and again collect more data and make progress towards the driverless car technology.
So eventually they will get driverless cars. It's a matter of when. It's a matter of how much competition will already be in place when they actually roll out the driverless cars and what produces the best profits, the best competitive advantages in this industry. Tesla is saying that the camera only approach with manufacturing at scale is the best way to go because that way they can deliver the lowest cost per mile for passengers.
They think that's the way to go. That's the approach. While others like Google's Whimo feels that maybe safety is the way to go, a safety first approach with liars and radars uh making the technology safer and more operable in more weather conditions, in more traffic conditions, but that could limit the scale of the roll out because of the expense of rolling out that technology.
And then companies like Uber are partnering with recently. You noticed they partnered with Lucid and ordered 20,000 EVs that they're going to convert into robo taxis. And will Uber's nearly 200 million monthly active customers prove to be the competitive advantage in the industry? So, will customer acquisition be the thing that facilitates competitive advantage?
All of that remains to be seen. It needs to be played out in the marketplace. It's a new area. It's a new market opportunity, one with massive potential. Uh could be a1 trillion dollar market in total customer spending. Uh and it remains to be seen how it'll be split among customers. So all that being said, where do I think Tesla's share price will be by the end of 2026?
Well, as I said, I do think its forward PE ratio will decline, and I do think there's even a chance that Tesla's share price will be lower than where it is today. I think the share price could be in the range of between $300 and $350 by the end of next year. And of course, it could be significantly higher than the estimate I'm making here.
It can also be significantly lower than the estimate I'm making here. I think it all depends on driverless car technology in terms of Tesla's valuation because as it is right now, if it just remains a car company, it's trading at, you know, 30 to 50 times the valuation of other car companies. So that could cause a huge collapse in its share price.
If something were to go wrong with the driverless car roll out and it doesn't get approvals and it doesn't get approval to operate, that could be a huge downside. And then on the flip side, if everything goes better than expected and Tesla's actually producing uh 2 million robo taxis every year and it's approved in all major cities in the United States, then the stock price will likely be significantly higher than the 300 to 350 range I'm highlighting here.
So this price target I provided for Tesla is available now for my investor tier members and above. In addition to getting the price targets for several of the companies, dozens of the companies that I'm following, you also get the buy, hold, and sell ratings I'm keeping for over 200 companies. And I update this spreadsheet daily.
And you get all of that with the investor tier membership. Also, with the investor tier membership, you get access to my discounted cash flow valuations for over 200 companies, including Tesla and SoFi and others, where I created s for all of these companies. You get all that for less than $15 a month. I think it's a great deal. .
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