TLDR
- Michael Burry published scathing assessment calling Tesla “ridiculously overvalued” on his Substack
- Tesla’s net income dropped 37% in Q3 while stock trades at over 300 times earnings
- Gross margins compressed from 19.8% to 18% as Chinese competition intensifies
- Burry previously bet against $530 million in Tesla shares during 2021
- Consensus price target of $381 implies 15% downside from current trading levels
Michael Burry delivered harsh words for Tesla investors this weekend. The man who famously bet against the housing market before the 2008 crash turned his attention to Elon Musk’s company.
Burry wrote on Substack late Sunday that Tesla’s market cap remains “ridiculously overvalued.” He pointed to Musk’s $1 trillion pay package as an ongoing source of shareholder dilution.
The hedge fund manager isn’t new to criticizing Tesla. He placed a massive short position worth $530 million against the stock in 2021. He exited that trade within months, describing it as “just a trade” to CNBC.
Tesla now trades near $479 per share with a market value approaching $1.5 trillion. The stock gained 70% over the last twelve months but sits up only 9% year-to-date.
Earnings Show Troubling Trends
Tesla’s third quarter results revealed cracks in the business model. The company reported $28.1 billion in revenue, topping analyst forecasts of $26.37 billion.
But earnings per share disappointed at $0.50 versus Wall Street’s $0.54 estimate. The stock showed little reaction to the mixed results.
Net income tells an even starker story. Profits fell 37% year-over-year to $1.4 billion. That’s a sharp reversal for a growth stock commanding premium valuations.
Revenue growth decelerated to 12% last quarter. Core automotive revenue advanced just 6%. These numbers don’t support a stock trading at 300 times earnings when the S&P 500 averages 26.
Margin pressure is building across the business. Gross margin slipped from 19.8% to 18% compared to the prior year period. Chinese manufacturers are launching competitive electric vehicles that force Tesla to cut prices.
Market share data confirms the challenge. Tesla controlled 41% of the U.S. electric vehicle market in August, but that figure has declined as rivals introduce new models.
The Valuation Disconnect
Wall Street analysts set their average price target at $381 per share. That represents potential downside of 15% from where Tesla trades today.
The price-to-earnings ratio highlights the disconnect between price and fundamentals. At over 300, Tesla trades at more than ten times the broader market multiple.
Burry criticized Tesla’s strategy shifts in his post. He wrote that “the Elon cult” jumped from electric cars to autonomous driving to robots as competition emerged in each category.
Musk promotes robotaxis and the Optimus robot as Tesla’s future. Both face established competitors including Google’s Waymo and Chinese robotics companies like Unitree.
Recent Performance Metrics
Tesla’s compensation plan for Musk requires the company to reach an $8.5 trillion market cap over the next decade. That’s almost double what Nvidia is worth today.
Shareholders approved the package last month despite questions about achievability. Tesla would need to become the world’s most valuable company by a wide margin.
The robotaxi announcement helped lift shares 11% in 2025. But slowing automotive sales and shrinking margins present headwinds.
Tesla maintains leadership in U.S. electric vehicle sales but faces mounting pressure from lower-cost Chinese competitors entering the market.
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