He called Tesla's stock crash. Now he thinks it'll fall even more.

Emma McIntyre/Getty Images; Apu Gomes/Getty Images; Chelsea Jia Feng/BI

·      Ross Gerber, an early Tesla investor, has flipped bearish and recently made a prescient call.

·      He told BI in late February that Tesla stock would fall 50% in 2025. It's down 31% since.

·      BI reconnected with Gerber, who doubled down and said the stock was unlikely to rebound this year.

Shares of Tesla have crashed 48% since peaking in mid-December, but the stock still isn't cheap enough for the company's longtime investor Ross Gerber to buy back in.

Gerber — who's been a Tesla investor for years, having loaded up on the stock before it boomed — told Business Insider last month that he expected a drop of as much as 50% in the stock this year as CEO Elon Musk focused on other endeavors, including DOGE, SpaceX, xAI, and X.

His prediction proved prescient. While Tesla shares were already in a downslide before the interview, they've continued to fall. As of Wednesday's close, the stock had tumbled another 31% since his late-February comments.

Now Gerber is doubling down. In a new interview, he told BI that he didn't see a clear path for it to rebound this year, even after recent losses.

Gerber — who's the president and CEO of Gerber Kawasaki Wealth & Investment Management, which oversees roughly $3 billion in assets — has had no issue matching his words with action. He reduced his firm's Tesla stake by 31% in 2024, regulatory filings show, leaving him with 262,000 Tesla shares, which were worth $106 million at the end of last year.

In fresh comments, the Tesla bull turned skeptic reiterated his view that even after the sharp correction, Tesla stock is still too expensive.

What does Tesla stock have to do to rebound?

Gerber thinks the answer is simple but elusive: Earnings have to rise.

"If I do $5 in earnings, at 50 times earnings, I can get to $250," Gerber said. "But they have no path to that."

Tesla's earnings per share dropped 52% in 2024 to $2.04. Analysts estimate the company is set to earn $2.75 a share in 2025 and $3.65 in 2026.

But those estimates have been in doubt recently amid an uncertain economic environment and declining Tesla sales around the world.

Gerber sees Musk's divisive political maneuvering as a lasting headwind for the Tesla brand, and he didn't pull punches when discussing it. He criticized Musk's gesture at the presidential inauguration that's been likened to a Nazi salute, said that he'd alienated customers with his political efforts and stances, and was critical of President Donald Trump's promise to buy a Tesla to support the brand.

In that light, Gerber called the decline of a stock that's been trading at 150 times earnings "the farthest thing from surprising in my book that you could come up with."

Tesla is still too expensive

Gerber said the valuation was still impossible for him to justify, even after its recent plunge.

Tesla shares traded at a forward price-to-earnings ratio of 65 times on Wednesday, more than triple the valuation multiple of the S&P 500.

The stock is nowhere close to being a bargain at that price, Gerber said, especially as analysts revise the company's projected 2025 vehicle sales lower for a second year in a row.

"As a traditional investor, it doesn't fit any valuation system that makes any sense compared to any other stock," Gerber said.

"Especially in this correction where you could actually buy Nvidia at 20 times earnings," he added. "And their expected earnings are expected to go up 75% this year, and they're buying back stock."

The broader stock market is adding pressure to Tesla's valuation multiple. Gerber said that investors would likely assign a lower multiple as long as the economic certainty surrounding Trump's tariffs remained.

The next phase of the equation is the evolving view of Tesla's growth prospects over the next five years.

"There's this game that is happening now where the fundamental story has to be revalued. So if Tesla trades at, let's say, even 50 times forward earnings — which is now $290 per share — even if you give them $3, you're at $150," Gerber said, referring to earnings per share. "So you're still trading at $225 with a stock that could go to $150 at 50 times."

The used-car market is brutal for Tesla

One of Tesla's biggest problems may be that its products are well-made.

Gerber called it the "Apple problem," where the quality of the product is good enough that customers are not incentivized to frequently upgrade.

"Teslas don't wear out very quickly, so you don't really have a lot of repeat demand because the cars run forever," Gerber said. "They have the Apple problem where the phones are too good. A 5-year-old Tesla is just as good as a 2-year-old Tesla."

That, combined with a surge in people looking to sell their EVs because of Musk's politics, has led to fast-dropping values for used Tesla cars.

And because prices are so low for used Tesla vehicles, and the quality is high, it makes little sense for consumers who want to own a Tesla to buy directly from the company.

"Unless the hardware is so much better than the previous versions, people don't have a huge incentive to update, especially price-conscious consumers in an inflationary environment," Gerber said. "So it really hurts Tesla, the used car market, it doesn't help them."