When discussing meme stocks, Tesla Inc. and its CEO Elon Musk often come up in conversation. Musk is known to be a fan of memes, but he is not amused when his company is labeled as a “meme stock.” However, some investing experts argue that Tesla deserves this label due to its current valuation.
What’s Behind the Label?
Tesla’s valuation has often been higher than its automotive peers. According to Ark Invest CEO Cathie Wood, this valuation should be a reality. However, experts are divided on whether Tesla should trade with a valuation similar to an automotive company or a technology company. Currently, its valuation significantly exceeds both sectors.
Expert Opinion
Yale School of Management Senior Associate Dean Jeff Sonnenfeld shared his thoughts on Musk’s new compensation package, calling Tesla the “biggest meme stock we’ve ever seen.” He pointed out the price-to-earnings ratio of Tesla, which is above 200. In comparison, companies like Nvidia have a price-earnings ratio of around 25 or 30, and Apple’s is around 35 or 36.
The Concerns with Valuation
Sonnenfeld emphasized that Tesla’s valuation is “crazy” and attributed it to an overemphasis on Musk’s influence. He stated, “They’ve, I think, put a little too much emphasis on the magic wand of Musk.” This overemphasis has led to a valuation that is not justified by the company’s performance.
The Importance of a Succession Plan
Sonnenfeld expressed concerns about the new compensation plan for Musk, calling it “foolish” and “reckless.” He warned that if Musk leaves Tesla, as he has hinted, the stock could plummet, and Musk would be the biggest loser. Sonnenfeld praised Musk’s talent but emphasized the need for a succession plan, highlighting Tesla’s loss of market share in Europe and China.
Market Performance
Tesla’s stock was down 2.1% to $416.85 on Thursday, with a 52-week trading range of $212.11 to $488.54. The stock is up 9.9% year-to-date in 2025.
Conclusion
The debate surrounding Tesla’s valuation and its status as a meme stock continues. While some experts argue that the company’s valuation is justified, others believe it is overemphasized due to Musk’s influence. As the company navigates its future, a succession plan and a more justified valuation may be necessary for long-term success.