The American electric vehicle (EV) manufacturer Tesla (NASDAQ:TSLA) has seen its stock go on a rollercoaster ride in recent years.
In this article, I’ll look at the company’s prospects moving forward, along with one potentially fatal problem I see on the horizon. First, let’s see how much I’d have gained from £1,000 invested in Tesla three years ago.
A story of 10x returns
A £1,000 investment in Tesla three years ago would now be worth £3,829. Not bad, right? But that doesn’t tell the whole story…
Here’s how my investment would’ve changed in six-month increments over the three years.
At one point, Tesla’s share price reached $342.32 and turned that £1,000 investment into nearly £12,000. If I believed that share price was correctly valued, an investment in Tesla could be the bargain of the decade. On the other hand, I don’t want to risk catching a falling knife. So let’s dive into the details.
The best play on the stock market?
Tesla’s dizzying highs are a classic case of first-mover’s advantage. The company brought the first usable and widespread EVs to market, and has been rewarded with a current global EV market share of 65.4% in 2022.
Where Tesla really shines, though, is in the margins on its vehicles. One recent analysis put Tesla’s profit-per-vehicle at $9,570. That’s 8x its rival Toyota’s profit-per-vehicle of $1,200. Tesla’s gross margins for its autos of 27.9% put it in the bracket of premium car manufacturers like Mercedes and BMW.
With the shift to EV well and truly underway — the 27 members of the EU last year agreed to ban new ICE (Internal Combustion Engine) vehicles starting from 2035 — Tesla seems well poised to take advantage.
However, there is one huge, insidious and irreparable issue that is stopping me from investing in Tesla…
Musk’s fatal mistake
Tesla’s co-founder, Elon Musk, recently acquired the social media company Twitter and he’s spent the time since perpetually in the headlines. Many think this is a distraction that will take his focus away from Tesla. I think his recent antics are a problem, but for a different reason.
Tesla was a left-wing darling. The image of the company with its electric-powered vehicles was forward-thinking and environmentally conscious. Save the earth, buy a Tesla. However, this is in direct contrast to Musk’s right-leaning Twitter shenanigans.
A 2022 poll saw 37% of US Democrat voters had an unfavourable impression of Elon Musk. Within a few months, this dropped to 59%. And when you consider that Democrats are far more likely to be in favour of phasing out ICE vehicles than Republicans — another poll putting it at 85% to 46% — I believe Musk is alienating his target market and ruining Tesla’s brand image.
As such, I do not see Tesla stock as good value for my portfolio right now.
The post If I’d invested £1,000 in Tesla stock 3 years ago, here’s how much I’d have now appeared first on The Motley Fool UK.
John Fieldsend has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2023