Are Tesla shares worth buying as Optimus humanoid robots move closer to production?

Are Tesla shares worth buying today?

Tesla (TSLA:NASDAQ) stock has been a very good investment over the last decade. Had one put $5,000 into the electric vehicle (EV) stock 10 years ago, that money would now be worth close to $150,000.

Is it a good stock to buy today? Let’s take a look at the investment case for the Magnificent 7 stock.

Tesla’s growth has slowed dramatically in recent years amid macroeconomic pressures and rising levels of competition in the EV space. Last year, for example, revenue actually declined.

However, taking a long-term view, the company continues to have growth potential. One major growth driver could be humanoid robots.

Tesla first started working on its ‘Optimus’ humanoids back in 2021. And since then, it has made significant advances in this area of technology.

CEO Elon Musk is very optimistic in relation to the potential of these robots. He believes that Optimus could be the biggest product of all time (and account for 80% of the company’s revenue).

In terms of production timeframes, Tesla is planning to start production in the months ahead with the goal of producing one million robots annually (before ramping up production and producing tens of millions of humanoids per year). So, we could see these robots for sale in the near future.

“We’re on the cusp of something really tremendous with Optimus, which I think is likely to be, or has potential to be, the biggest product of all time.”
Tesla CEO Elon Musk

On the downside, Tesla is not going to be the only company producing humanoid robots. Today, there are lots of other businesses developing them including the likes of XPeng, UBTECH, and Richtech Robotics.

So, it’s not like Tesla is going to have the market to itself, as it did with EVs in the early days of these vehicles. Realistically, competition is going to be intense, and this will have implications for profitability – there is no guarantee that the company will have success with humanoid robots.

One other issue to be aware of from an investment perspective is that Tesla has a very high valuation today. At present, the company sports a price-to-earnings (P/E) ratio of around 200.

This is the highest P/E ratio of the Magnificent 7 stocks by a wide margin (Nvidia has a P/E ratio of about 25). And it adds a lot of risk to the investment case – it’s pricing in a lot of future growth (and leaving no room for error).

So, investors need to weigh up the bull case here with the risks. The shares could be worth buying but they are risky given the valuation.

What is Tesla stock going to be worth in 5 years?

In terms of what Tesla stock is going to be worth in five years, this is the trillion-dollar question. Ultimately, no one knows today.

A lot will come down to growth. If the company has success with humanoids and other products such as self-driving cars, the stock could climb significantly over the next five years.

If, however, these products flop and growth stalls, the stock may go nowhere. It could even fall, given the high valuation today.

Are Tesla stocks expected to rise?

Looking at forecasts for Tesla stock, analysts generally don’t expect the share price to rise in the near term. At present, the average 12-month price target is $391, which is a few percentage points below the current share price.

That said, there are some investors who are more bullish on Tesla stock, especially in the long run. ARK’s Cathie Wood, for example, is forecasting a stock price of $2,600 by 2029.

What if I invested $1,000 in Tesla 10 years ago?

As noted earlier, Tesla stock has been a fantastic investment over the last decade. Had an investor put $1,000 into the company 10 years ago, that money would now be worth close to $30,000.

Investors should not assume that the tech company will produce the same kind of returns going forward though. Looking ahead, the stock could struggle if growth is underwhelming.