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Tesla’s share price: 3 things I think UK investors should know

Edward Sheldon, CFA
·3-min read
Tesla
Tesla

Tesla (NASDAQ: TSLA) stock is having an amazing run at the moment. Already this year, the electric vehicle (EV) manufacturer’s share price is up over 20%. Meanwhile, over the last 12 months, it’s up around 700%.

As a result of the huge level of excitement around Tesla, UK investors are scrambling to buy the stock. Last week, for example, it was the second most purchased stock on the Hargreaves Lansdown platform. Is buying now a good move? Here are three things those in the UK should know about the Tesla share price.

Tesla now has an enormous market cap

The first thing to know about Tesla is that, after its recent share price rise, it now sports a market capitalisation of $770bn. That’s enormous. That makes it one of the largest companies in the S&P 500 index.

It’s worth pointing out here that Tesla sold 499,550 cars in 2020. That puts the market-cap at roughly $1.5m per car sold. Of course, it’s not just about the cars anymore. Those betting on Tesla now are essentially backing the company to dominate a range of industries including clean energy and autonomous vehicles (AVs).

They’re also backing Elon Musk. As CNBC’s Jim Cramer said last week: “It’s his brain that we’re buying.”

Tesla’s share price divides opinion

Tesla’s huge market-cap does divide opinion though. Some investors believe it’s warranted, given Tesla’s long-term growth potential. For example, Morgan Stanley analyst Adam Jonas recently reiterated his ‘overweight’ stance on the stock.

In our opinion, Tesla is still the best positioned company in EVs and AVs under our coverage due to its people, its technology, business model and access to capital,” he wrote last week.

However, others aren’t so convinced. For example, Blue Whale Growth portfolio manager Stephen Yiu recently said Tesla reminded him of Cisco in the late 1990s. It was tipped to dominate the internet space, but didn’t.

There’s a lot of expectation and speculation,” Yiu said last month in relation to Tesla stock.

The Big Short investor still expects TSLA stock to fall

Finally, UK investors should know that Michael Burry, the hedge fund manager who featured in the movie ‘The Big Short’, is still shorting Tesla stock. This means the investor – who predicted the housing market crash – expects the stock to fall.

Burry is currently sitting on a large loss on his Tesla short position. However, he noted last week that his housing market bet a little over a decade ago didn’t pay off straight away either.

Well, my last Big Short got bigger and bigger and BIGGER too. Enjoy it while it lasts,” he tweeted last week.

My view on Tesla stock

My view on Tesla stock is the same as it was last year. I think caution is warranted after the exponential share price rise. I like the company. However, I don’t like the valuation.

Right now, I think there are much better growth stocks to buy.

The post Tesla’s share price: 3 things I think UK investors should know appeared first on The Motley Fool UK.

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Edward Sheldon owns shares in Hargreaves Lansdown and has a position in Blue Whale Growth. The Motley Fool UK owns shares of and has recommended Tesla. The Motley Fool UK has recommended Hargreaves Lansdown. 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 2021