Despite rallying as much as 130% last year, Tesla Inc (NASDAQ: TSLA) has had a poor start to 2026. With its shares around $400, they’re down nearly 20% from December’s all-time high. At first glance, this may sound like a buying opportunity, yet the stock’s price-to-earnings (P/E) ratio still sits at a frothy 371. Before the recent pullback, it was above 400.
Two years ago, that same multiple was closer to the mid-40s. It’s a valuation jump that has raised more than a few eyebrows, especially as it’s happened even as Tesla’s earnings have been hit and miss in recent quarters. That alone makes the current setup unusually sensitive. The question now is whether investors should consider this stretched multiple as a bullish signal or a major warning sign.
