Tesla (NASDAQ:TSLA) shares soared before and during the pandemic. The Elon Musk-owned company has become one of the most valuable stocks in the world, with a market-cap of more than $650bn. That’s greater than any pharma firm or non-state owned oil company. In fact, it’s currently the seventh most valuable listed company in the world.
Mega returns
The growth in the Tesla share price over the past 10 years has been huge. In fact, the share price is up 10,497% over the decade. That is truly massive. So if I had invested £1,000 in the then-start up electric vehicle (EV) company 10 years ago, today I’d have a little over £105,000? Not quite. There’s one more thing to take into account.
The thing is, back then, £1,000 would have got me around $1,600 — it’s important to remember that Tesla is listed in dollars. And today, that $1,600 would be worth nearly $170,000. Due to the weakness of the pound, the $170,000 is worth around £150,000 today.
So that £1,000 would be worth around £150,000 right now.
But of course, it’s worth remembering that investing £1,000 in a start-up EV company — with only one car in production — would have appeared highly risky 10 years ago. In fact, until 2012, Tesla had only produced its Roadster sports car — not something with widespread appeal.
Can it go further?
Despite the huge gains over the past 10 years, it’s worth noting that Tesla is down 51% over the past 12 months. The stock was worth around $400 earlier in the year. So the big question is, will it recover?
Even at the current share price, Tesla looks expensive on several metrics. The stock has a price-to-earnings ratio of around 52, versus a median of 9.5 within consumer discretionary. It has also a price-to-sales ratio of 8.1 versus a consumer discretionary sector average of 0.83.
In fact, according to all metrics, including price-to-book and price-to-cash flow, Tesla trades with higher multiples than the consumer discretionary average.
However, it’s worth noting that EVs are not a regular part of the consumer discretionary sector. In fact, Tesla is the only EV manufacturer to make a profit at this moment in time — although Li Auto may also turn its first profit in FY 2022.
Where do I stand on Tesla?
As respected investor Cathie Wood said earlier in the year: “Tesla is in the prime position to dominate” the EV market. I do appreciate this entirely. It’s a company with an impressive growth story and disruptive tech.
However, it’s valuation dwarfs that of any other car company, and that concerns me. Why? Because I’m not convinced it will become the biggest car-producing company in the world. In fact, I actually see other companies such as Li Auto, NIO and Porsche increasingly competing for its market share.
So while I appreciate the potential of Tesla, I’m not buying this stock. But I certainly wish I’d bought some shares 10 years ago.
