Elon Musk Buys Tesla Stock for First Time Since 2020. Should You?

Tesla CEO Elon Musk bought about $1 billion worth of Tesla stock on Sept. 12. It was his first open market purchase since February 2020, according to Dow Jones Market Data. (Photo by BRENDAN SMIALOWSKI/AFP via Getty Images)

Key Points

About This Summary

• Tesla shares were up 2.8% in afternoon trading after Elon Musk bought $1 billion of the company’s stock.
• Musk purchased 2.6 million shares, his first open-market buy since February 2020.
• Shareholders will soon vote on a pay package potentially worth $1 trillion in options for Musk.

Tesla stock was soaring after Elon Musk bought shares for the first time since 2020—and it could be a good sign for investors in the shares.

Following insider purchases is a longstanding strategy for identifying winners. Investors like it when management teams put their money where their mouth is. As is the case with so many things about Tesla, typical rules don’t apply.

Shares traded as high as $425.70 before falling back to $410.26, up 3.6% on the day. The move wiped out year-to-date losses, leaving shares up almost 2% for the year. The S&P 500 and Dow Jones Industrial Average added 0.5% and 0.1%, respectively.

The jump came after Musk disclosed purchases of 2.6 million shares worth about $1 billion made on Friday. Investors like it when CEOs show confidence in their stocks. The purchases raised Musk’s total holdings, excluding any stock options, to about 413 million shares.

Musk’s confidence likely comes from Tesla’s AI efforts. Tesla uses AI computing to train cars to drive and train humanoid robots to do useful tasks. Tesla launched a self-driving taxi service in Austin, Texas, in June, and plans to sell significant quantities of robots in 2026. Musk has suggested that both opportunities can generate trillions of dollars in value for Tesla shareholders.

It was Musk’s first open-market purchase since February 2020, when he bought 13,037 shares for about $10 million, according to Dow Jones Market Data. (Tesla stock has split twice since those purchases were made.)

It’s all good news, but it doesn’t mean that investors should pile into Tesla stock now. For starters, there is the problem of valuation. Tesla now trades for about 168 times estimated 2026 earnings, according to FactSet. The rest of the Magnificent Seven stocks trade for an average of closer to 28 times.

That’s a steep price to pay. CFRA analyst Garrett Nelson isn’t a buyer. He downgraded shares to Sell from Hold on Monday, writing, “the stock’s valuation has become decoupled from fair value and underlying fundamentals.” Nelson maintained his $300 price target for shares.

Still, bulls would argue that depressed earnings inflate Tesla’s price-to-earnings ratio due to falling car sales. What’s more, the company believes it is on the cusp of a new wave of earnings growth thanks to AI-trained self-driving cars and humanoid robots.

Tesla delivered about 721,000 EVs in the first half of 2025, down 13% year over year.

Jumping into Tesla stock can be a scary proposition for an investor without a position. Barron’s, in recent years, has only recommended Tesla stock once, in January 2023, with shares trading just above $100. Back then, investors were worried about Musk’s purchase of Twitter, now X. Shares were up about 120%, above $235, a year later.

That’s the other thing about Tesla stock. It’s volatile, seemingly swinging between euphoria and fear annually. With Tesla stock, I generally believe it’s better to load up on Tesla shares when things look bleak. It provides some valuation buffer.

Future Fund Active ETF co-founder Gary Black says he sold Tesla stock at about $358 and believes fair value is in the $310 range. That isn’t where he wants to buy, however. Black tells Barron’s he’s looking for a price below fair value, about $240, to get back in. Shares might not reach that level, and investors don’t need to sell everything, but guardrails around any position, including Tesla, can be a good idea.

I have long argued that it’s relatively safer to hold less Tesla stock when shares are relatively expensive and more when shares are cheaper. Now is a time to hold a little less Tesla stock, saving a little capital for when things look, well, bleaker.

As for what could knock Tesla stock off its lofty perch? Musk’s political activities, Musk’s time spent at other businesses, declining EV sales growth, losing federal tax credit support for the industry, and delays in rolling out robo-taxis or robots could do it. So could the market. Any correction for some unforeseen macroeconomic problem would impact most stocks.

While Musk’s purchase is a vote of confidence, it’s still a relatively small portion of his net worth, estimated at some $460 billion by Forbes.

Musk also holds about 300 million stock options worth roughly $150 billion. He was awarded those in the contested 2018 pay package that shareholders approved twice. The second time came after a Delaware judge voided the pay package, citing insufficient shareholder disclosures.

Tesla shareholders will soon vote on a 2025 pay package for Musk that would award him about 425 million incentive-laden options. If he hits all the incentives, the options would be worth roughly $1 trillion. Among those milestones are generating $400 billion in annual earnings before interest, taxes, depreciation, and amortization, or Ebitda, and Tesla reaching $8.5 trillion in market capitalization.

At $8.5 trillion, Tesla stock would be roughly $2,100 a share, accounting for Musk’s options. That might be the number that has Tesla bulls excited. Regular investors can be excited, too, but a little caution goes a long way.

Write to Al Root at allen.root@dowjones.com