Wall Street is sending conflicting signals about Tesla: analysts' average forecast for its 2026 net profit has plummeted 56% over the past 12 months, drastically revised down from $14.1 billion to just $6.1 billion, reflecting deepening skepticism about its profitability. Yet, during the same period, the average 12-month target price for the stock has been counter-intuitively raised from around $338 to nearly $410.

This rare divergence reveals the market's current valuation logic for Tesla: its stock performance is now more heavily anchored to the long-term visions painted by CEO Elon Musk, such as humanoid robots and autonomous driving, rather than the company's near-term vehicle sales and financial fundamentals.

Tesla is set to release its latest earnings report imminently. While the market closely watches its performance guidance, analysts are even more eager to understand the concrete progress in emerging business areas like autonomous driving and robotics; this information could become the key to supporting the current high valuation expectations.

The degree of divergence between Tesla's current stock price and its profit expectations has reached an "extremely unusual" level. Typically, an increase in a target price accompanies an improvement in profit expectations, not a significant downgrade, which defies conventional valuation logic.

Currently, Tesla's forward price-to-earnings ratio exceeds 195 times, significantly higher than its peers in the "Magnificent Seven" tech stocks. The group's overall forward P/E ratio is approximately 29 times, while core members like Apple, Alphabet, Microsoft, and Amazon generally trade between 25 and 30 times.

Within the S&P 500 index constituents, Tesla's P/E ratio also ranks as the second highest, trailing only Warner Bros. Discovery, which is in the midst of a merger process, and is far above the third-placed Palantir. Mike Tyndall, an analyst at HSBC, noted in a recent report:

"If its valuation were closer to the industry average, we might consider the stock's risk-reward ratio attractive."

However, the reality is that other members of the "Magnificent Seven" generally possess "higher profitability and more substantial cash flows," yet their valuations are significantly lower than Tesla's. This contrast highlights that the market's premium pricing for its long-term vision has detached from conventional fundamental frameworks.

To understand the heterogeneity of Tesla's valuation within the "Magnificent Seven" more clearly, a key observation emerges: over the past year, while target prices have been raised for all members of the group, only Tesla has seen its profit expectations deteriorate significantly during the same period.

The "vision premium" implied by Tesla's current stock price has become the core of market disagreement. The stock's pricing logic has clearly deviated from its electric vehicle sales fundamentals, shifting instead to focus more on the long-term prospects outlined by Musk for humanoid robots and full self-driving technology. Although these areas possess high-growth potential, Tesla has yet to demonstrate sustainable profitability in such businesses.

Following Tesla's announcement of weaker-than-expected Q4 vehicle deliveries, Alexander Potter, an analyst at Piper Sandler, stated in a report:

"The importance of the delivery metric has declined significantly. Instead, Tesla's performance in 2026 will be primarily driven by its substantive progress in the fields of artificial intelligence and robotics."

Potter maintains an "Overweight" rating on Tesla stock but also cautions:

"Without further disclosure regarding progress in new businesses, market attention may shift back to its weak short-term profit expectations, thereby putting pressure on the stock price."

This tension is at the heart of the debate surrounding the stock's high valuation. George Gianarikas, an analyst at Canaccord Genuity, believes that the "generational growth opportunities" in robotics, autonomous driving, and energy storage make Tesla's price worthwhile.

Michael O'Rourke, Chief Market Strategist at Jonestrading, stated that a fundamental shift in Tesla's strategy also makes it a rare case where expected profits can indeed diverge substantially from the stock target price. He said:

"Analysts are willing to value the company based on businesses that are not yet commercialized. Simply put, they would rather bet on Musk than bet against him."