For years, this writer has been arguing that Tesla owes its gigantic valuation—today standing at $1.3 trillion—almost entirely from the “Elon Musk magic premium,” created when his long-term fans buy into promises of fabulously profitable futuristic products that Musk and Tesla so far have failed to commercialize. Put simply, it looks impossible for Tesla to grow its current, minuscule profits nearly fast enough to justify a market cap starting at $1.3 trillion, since that number would need to grow rapidly from there to hand investors a decent return.

That’s pretty much what Brinkman concludes as well, and to characterize his position as “contrarian” is an understatement. In his new report, Brinkman cites Tesla’s disappointing deliveries—just 358,000 vehicles for Q1—then uses that number to spotlight the giant and growing historical disparity between the market’s vast hyper-bullish expectations and Tesla’s actual underwhelming performance.

In June 2022, Brinkman points out, when the consensus forecast for its car sales reached its peak, the analyst community projected that unit deliveries would reach 1.366 million by the opening quarter of this year. The actual figure fell short by over 1 million, or 71%. Since that June 2022 prediction, Wall Street’s forecasts for revenues and profits have kept dropping, yet Tesla’s share price waxed by 50%. Today, according to Bloomberg, the Wall Street analyst consensus reckons Tesla’s still cheap and that its shares will rise 15% from here to $416 over the next 12 months.

Writes Brinkman, “We advise a high degree of caution, mindful of execution risk and the time value of money within the context of distant out-year earnings expectations implied by the rise in TSLA’s share price that has occurred alongside a collapse in consensus for all performance metrics.” The crux, he says, is that Tesla is pretty much pivoting away from the shrinking EV business and into two entirely new fields: autonomous driving that encompasses robotaxis and self-driving software, and robotics. That transformation, Tesla announced on its January earnings call, will require $20 billion in capital expenditures for 2026—and the number could be far higher, since Tesla also plans to build its Terafab plant in Fremont, Calif., to produce in-house advanced software for its new suite of products.

As Brinkman states, it’s hard to know where the cash for all that planned investment will come from. Last year, Tesla spent $8.5 billion in capex. And about $1.6 billion of that total flowed from the sale of regulatory credits, a business that Musk acknowledges will fade from here, given changes in U.S. energy and tax policy under President Trump. Hence, it will need to fund at least $11 billion to $12 billion more in plant and equipment this year than last. Brinkman warns that Tesla risks earning puny returns on all the new capital piling on its balance sheet. The reason: Unlike EVs in the early days, both of its new franchises face stiff competition from rivals that arrived first. Alphabet’s Waymo has already spread robotaxis across America, and the number of robot producers is large, ranging from Apptronik and Boston Dynamics in the U.S. to Unitree and Agibot in China.

Brinkman notes that in June 2022, analysts projected that Tesla would book $35.7 billion in free cash flow this year. Today they’re calling for an outflow of nearly $5 billion, due largely to the enormous new requirements for capex.

Even Brinkman’s numbers may be too rosy

Brinkman deserves great credit for at last bringing a sober, non-starstruck, numbers-centric analysis to Tesla’s prospects. But is it possible that even a price drop of more than two-thirds will be enough to make its shares a good deal, or even reasonably valued? Brinkman posits net earnings of $6.5 billion for this year. At his $145 share price, Tesla’s market cap would drop from the current $1.3 trillion to under $500 billion. But even at that reduced ticker, how many dollars in earnings would a new investor be getting for each $100 they bet on Tesla? Its price/earnings ratio would be way below today’s number of around 200, but still sit at a towering 77 ($500 billion market cap divided by $6.5 billion in net profits). You’d be getting just $1.30 in profit for every $100 in shares.

That multiple would leave Tesla as far and away the most expensive member of the so-called Magnificent Seven stocks. To justify what investors paid, at a 10% annual return, it would need to re-reach the $1 trillion market cap threshold in seven years, and earn something like $40 billion a year. Should you follow the math, or Musk’s gauzy vision that’s a constantly retreating horizon? Brinkman says that though Musk’s charisma can create a temporary force field, the math always rules eventually. Brinkman’s got most of Wall Street against him, but the facts and numbers are on his side.