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Tesla P/E Hits 400: 2 Reasons It's Still a Buy, 1 to Avoid
Submitted by Sam Quirke. Published: 2/3/2026.
In Brief
- Tesla’s post-earnings chop has not broken the primary uptrend, but bulls must keep defending the $420 level in the coming weeks.
- Analysts remain broadly bullish, with multiple Buy reiterations since last week’s report and price targets ranging up towards $520.
- However, a P/E ratio around 400 indicates a high-risk, high-reward setup, and there will be little tolerance for slip-ups going forward.
With Q4 earnings now well and truly digested, investors are watching closely to see how Tesla Inc (NASDAQ: TSLA) shares behave through the first week of February.
Yes, the company topped analyst expectations on both revenue and earnings, but that success came with a catch: the stock exited its latest earnings report with an even higher valuation than before, leaving its price-to-earnings (P/E) ratio at roughly 400.
Buffett's Parting Gift to Berkshire Hathaway? (Ad)
The biggest tech investors have unloaded their top AI investments. Peter Thiel's fund dumped its entire $100 million Nvidia stake. SoftBank unloaded its entire $5.8 billion position. Perhaps the biggest signal is Berkshire Hathaway sitting on $382 billion in cash, more than Amazon, Microsoft, and Apple combined. Was this Warren Buffett's parting gift before stepping down? Four unstoppable market forces could upend the economy in the coming weeks. Any one could be devastating alone, but four at the same time would wreak havoc. The last time this played out was over 50 years ago, leading to a lost decade for stocks.
Watch the interview revealing these four market forces.That leaves Tesla—despite delivering a decent report—in an uncomfortable position heading into Q1, with the stock balanced between long-term optimism and short-term skepticism. On one side are bulls willing to look past valuation and trust the company's ability to execute.
On the other are bears who see a multiple this frothy as an accident waiting to happen.
For now, the balance is leaning slightly toward the bulls. Let's explore two reasons Tesla is still a buy, and one reason investors may want to avoid it.
Reason #1: The Uptrend Is Still Intact
The strongest argument for staying constructive on Tesla is simple—price action. The long-term uptrend that began last spring remains intact, even after a few weeks of choppy trading.
The roughly $420 area where the stock sits matters enormously. Bulls have defended this level several times this year and, so far, have succeeded. As long as Tesla holds above this zone, the broader structure remains constructive, with higher lows still underpinning the chart. From a technical perspective, that gives the stock a plausible path back toward the $500 region, where it briefly tagged an all-time high in December.
That upside is far from guaranteed, however, especially given the inflated valuation. Realizing it will require consistent execution from Tesla's leadership and growing conviction among bulls in the company's long-term potential.
Reason #2: Analysts Are Still Backing the Story
Despite valuation concerns, analyst sentiment remains more supportive than many might expect.
Over the past week, several firms reiterated Buy or equivalent ratings on Tesla, offering a clear vote of confidence in the company's growth prospects.
Supportive voices include Deutsche Bank, Canaccord Genuity, and Piper Sandler. Each maintained a positive stance after earnings and issued refreshed price targets as high as $520, implying roughly 25% upside from current levels.
The common thread in these bullish takes is confidence in Tesla's ability to execute, scale, and continue shaping multiple high-growth markets simultaneously.
Analysts are essentially betting Tesla can remain the rare company that justifies extreme multiples for longer than many expect.
Reason #3: A 400 P/E Is Playing With Dynamite
Now for the reality check. A post-earnings P/E ratio near 400 is not just expensive—it's unforgiving. At this valuation, even small disappointments or slightly negative updates could trigger a violent sell-off, and market sentiment often moves ahead of fundamentals.
There is no shortage of skeptics. Phillip Securities recently set a price target of $215, and that wasn't even the most bearish—JPMorgan's $145 target implies a decline of more than 65% from current levels.
These bearish views rest on a simple premise: no company, regardless of quality, should trade at this kind of multiple without near-perfection, and Tesla is far from perfect. With competition increasing, deliveries under pressure, and a CEO prone to courting controversy, critics argue there are easier ways to make money than buying a stock priced like this. That risk is real; investors must weigh Tesla against their own tolerance for risk and reward.
Bottom line: Tesla remains a high-conviction trade for bulls prepared to look past a sky-high valuation, but it also represents a high-risk proposition for more conservative investors.
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