Key Morningstar Metrics for Tesla
- Fair Value Estimate: $300.00
- Morningstar Rating: ★★
- Morningstar Economic Moat Rating: Narrow
- Morningstar Uncertainty Rating: Very High
A California administrative law judge ruled that Tesla TSLA will face a 30-day suspension of its licenses to produce and sell vehicles within the state. Tesla shares were down slightly on Dec. 17 at the time of writing.
Why it matters: The California plant is Tela’s second-largest in the United States, and the firm sells more vehicles in that state than in any other. A suspension of its production and sales would have a significant near-term financial impact on the company.
- The suspension is due to Tesla’s marketing around its Autopilot and full self-driving software. The California Department of Motor Vehicles said it would pause enforcement of the order for 60 days to allow the company time to address its marketing claims.
- Tesla noted the case was not due to any customer complaints and that it expects sales in California to continue uninterrupted. We think Tesla will change its marketing messaging enough to avoid the suspension. As a result, we expect no impact on the company from the ruling.
The bottom line: We maintain our $300 fair value estimate for narrow-moat Tesla. At current prices, we view Tesla shares as overvalued, with the stock trading more than 60% above our fair value estimate and in 2-star territory.
- Even without a suspension, we forecast Tesla will see declining US deliveries in the fourth quarter and early 2026. This is due to the expiration of the US electric vehicle tax credit, which expired Sept. 30. We expect this will weigh on 2025 sales and cause 2026 deliveries to decline.
- Yet, Tesla’s stock reflects market optimism for its autonomous driving software that will power its robotaxi ride-hailing service and its full self-driving subscription software. While we think Tesla will successfully develop the software, we think the market is assigning it too high a valuation.
