What’s the move with Tesla’s stock?
Hey, so ive just started investing and put some money into Tesla- and it keeps on growing!!
It's current growth feels unsustainable and a correction should be due? Right?
The Morning Star rating for it says it way overpriced and so do many other professionals.
But at the same time they have said that for almost month of thier growth. And with a rumored, "super battery" announcement soon, selfe driving, the Tesla Semi, the Cyber Truck hype and so much more should I be investing a bit more into it?
Of course a well balanced portfolio is important etc etc, just wondering about when people think is a good time to invest in Tesla and why?
Answers ( 3 )
I will use Amazon as an illustration. In Dec 1999 it was trading at $107 (*), near two years later Nov 2001 it as trading at $6.78, so the price fell 94% in two years. Had a horrific disaster befallen Amazon, where they shutting down? No, in fact, the business was growing very rapidly, they weren't making a profit just yet, but they weren't in 1999 either. So it was entirely down to sentiment and speculative trading. BTW if you think maybe it was that Amazon wasn't worth $107, then the price today is $3,401.80. Anyway, my point is that if you are buying Tesla today you are a speculator, not an investor and speculators need to know what they are doing--i.e. a plan for when to stay in and when to get out. An investor, on the other hand, buys and then sells in several decades time when they retire or need the cash for a house purchase or something else, but an investor doesn't want a stock like Tesla or Amazon it is just too heart-wrenching. There are few people with the intestinal fortitude to hold a stock as it loses 94% of its value.
(*) I am using the split-adjusted prices because I don't know how many splits have occurred in the last 20+ years.
I've heard it said, as a VERY rough rule-of-thumb, that a company's market capitalization (that's their stock price times the total number of shares outstanding) is an estimate of all of the profit the company will ever make, for the rest of eternity.
So Tesla is currently at $2213, with about 186 million shares in existence. Multiply those together and it assumes $410 billion in profit. Currently, Tesla's revenues are $26B, with profits of $5B -- so that's 80 years of profits. From that perspective, Tesla's price is ridiculous. But if it's reasonable to believe that Tesla is revolutionary -- that their market share will only increase and their profitability and security is rock-solid -- then it's not so far-fetched as a long-term investment. It certainly seems like no bargain at a market cap that's 15 times as big as their annual revenues.
If, however, you were trying to ask "should I buy now, so I can sell in a couple months and make a profit?", then my answer would have been "I have no idea". That's just speculation on short-term feelings about a company (and the market as a whole), and that's just gambling.