Tesla Stock Rally Faces Valuation Concerns Amid EV Market Competition

Tesla shares have surged by double digits in 2025 despite a rocky start to the year, pushing its market capitalization to $1.3 trillion. Analysts project the company could reach a $2 trillion valuation by 2026, but skepticism lingers over its premium pricing relative to rivals.

The stock trades at a price-to-sales ratio of 16—a 100% to 400% premium over competitors like Rivian and Lucid Group, which hover between 3 and 7 times sales. This disparity persists even as Tesla's revenue is forecast to decline by 5% this year, while Lucid and Rivian anticipate growth of 61% and 6%, respectively.

Market watchers question whether Tesla's growth trajectory can justify its lofty valuation, particularly as smaller EV players demonstrate faster sales expansion. The divergence highlights broader tensions in the electric vehicle sector, where investor enthusiasm often outpaces fundamental metrics.