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Tesla P/E Hits 400: 2 Reasons It's Still a Buy, 1 to Avoid
Author: Sam Quirke. Posted: 2/3/2026.
Summary
- 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 left its latest earnings report sporting an even higher valuation than before, with its price-to-earnings (P/E) ratio now around 400.
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Discover how to invest in the fund Trump uses to collect this income >>That leaves Tesla—despite delivering a decent report—in an uncomfortable spot heading into Q1, balanced between long-term conviction 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. Below are two reasons Tesla still looks like a buy, and one reason investors may want to stay away.
Reason #1: The Uptrend Is Still Intact
The clearest argument for staying constructive on Tesla is price action. The long-term uptrend that began last spring remains intact, even after a few weeks of choppy trading.
The $420 area matters. Bulls have been forced to defend this level several times this year and have, so far, managed to do so. 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 legitimate path back toward the $500 region, where it briefly tagged an all‑time high in December.
That upside is far from guaranteed, especially given the stretched valuation. Progress toward $500 will require consistent execution from Tesla's leadership and growing conviction among investors that the company can deliver on its long-term potential.
Reason #2: Analysts Are Still Backing the Story
Despite valuation concerns, analyst sentiment has been more supportive than many might expect.
Over the past week several firms reiterated Buy or equivalent ratings on Tesla, offering a firm vote of confidence in the company's growth prospects.
Supportive voices include Deutsche Bank, Canaccord Genuity, and Piper Sandler, each maintaining positive stances after earnings and issuing refreshed price targets that go 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 effectively betting Tesla can remain one of the rare companies that justifies extreme multiples for longer than many expect.
One Reason to Stay Away: A 400 P/E Is Playing With Dynamite
Now the reality check. A post‑earnings P/E ratio around 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 sentiment often moves ahead of fundamentals.
There are plenty of skeptics. Phillip Securities recently set a price target of $215, and that was not the most bearish—JPMorgan's $145 target implies a drop 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‑perfect execution, and Tesla is far from perfect. With competition rising, delivery numbers under pressure, and a CEO who courts controversy, critics argue there are easier ways to make money than buying a stock priced like this.
The risk is real. Investors will need to weigh Tesla's upside potential against the prospect of sharp downside and make a decision based on their own appetite for risk and reward.
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