Tesla (NASDAQ: TSLA) stock has been almost as enigmatic as its boss Elon Musk. We should expect groundbreaking growth stocks to hit highs and lows in their early days, and Tesla has had its share of volatility.
But the share price has fallen nearly 60% since the peak of 2021, and the recent trend has been down. That’s two and a half years of bearishness, which could test even the most optimistic among us.
Falling value
If I’d invested my £10,000 in Tesla stock two years ago, I’d be looking at a value today of £7,900. At 21%, that’s not a huge fall. And new tech stocks often suffer worse than that and bounce back stronger.
And if I’d got in just a few months either way, the result could be very different. In fact, if I’d timed my entry just right in January 2023, I could be up 70% by now.
But the past’s gone. What matters is what happens next, and I see a whole lot of uncertainty. And it’s down to that Musk chap.
Texas showdown
Tesla’s financials are being overshadowed by a bit of a management crisis. And it’s all about the boss’s pay.
Having had a planned $56bn package outlawed in Delaware, the company now wants to relocate its incorporation to the state of Texas. The deal would take Musk’s stake in Tesla from under 13% to over 20%. It needs shareholder approval, with a vote due in June.
Will it be a tough sell? Here’s what Tesla chair Robyn Denholm said, speaking to the Financial Times: “It’s like Mount Everest. It’s a huge hill to climb because getting 50% of the shareholders to vote, let alone what they vote for, is quite tough.”
The next two years
What about the next two years, and beyond? Is Tesla still the solid long-term buy that it looked just a few years ago?
The mercurial Musk has talked about moving on to do AI research outside of Tesla if he doesn’t get his way. And having to guess where the boss’s mood might take him next is not great for shareholder confidence.
Then China, it seems, is producing some great electric vehicles (EVs). And selling them at low prices, allegedly due to state financial support. The US has put big restrictions on imports, but there’s serious competition in other parts of the world.
Still, I’d expect Tesla to be dominant in the West, with its first-mover advantage in batteries, infrastructure, and the whole market.
Looking ahead
I find Tesla’s stock valuation attractive now, and I see a good chance of a £10k investment today doing well in the next few years. The forecast price-to-earnings (P/E) ratio would drop to 41 by 2026.
And I rate that as fair for a company with such potential in EVs, AI, robotics…
But it could all depend on how the vote goes in June, and what Musk does next. And for me, that’s a big reason to steer clear. At least for now.
