It’s fair to say that 2022 won’t go down as a vintage year for most markets and most investors. Even so, the fall of electric vehicle giant Tesla (NASDAQ: TSLA) stock has been sobering.
So, how much (or little) would I now be sitting on if I’d invested at the beginning of 2022?
And could things get even worse in 2023?
Market darling to fallen star
As I type, Tesla stock is down 70% year-to-date. So, if I’d put £1,000 of my hard-earned cash to work at the start of 2022, I’d now have just £300 or so left.
This is a rough approximation because it will depend on other factors. These include how much commission I paid to my online broker. Nevertheless, no amount of mental gymnastics can change the fact that this is a horrible result.
To rub salt in the wound, Tesla doesn’t pay dividends. That’s understandable for a growth company, but it means investors aren’t even being paid for their pain.
I suppose the only bright spot is that the share price gains made over the pandemic haven’t been completely eradicated. At least for now.
Is there worse to come?
Fortunately, I don’t own a slice of Tesla directly. However, I do have a fair amount of my Stocks and Shares ISA invested in Scottish Mortgage Investment Trust. It has been (and remains) a huge backer. So, this is most definitely not just a grim thought experiment on my part.
Is the worst over?
Possibly not. Although the company’s valuation has already plummeted alongside other growth stocks in the wake of multiple interest rate rises, it’s still far from cheap. Further rate rises in 2023, coupled with more signs of a slowing in demand could see more investors bail.
The growing strength of competitors is another potential headwind. While Tesla has clearly stolen a march on rivals, I think it’s dangerous to think that its crown will never slip. In fact, it seems fair to assume the company’s moat (and margins) will be tested in the next few years as ever more money is thrown at the EV sector by other manufacturers.
In addition to all this, there’s a rather unpredictable CEO in Elon Musk. Asset or liability? As a humble private investor, I’m still on the fence.
The opportunity of a lifetime?
On the flip side, Musk does have form in turning things around. He could do the same again, assuming he refocuses his doubtless abilities on Tesla after eventually stepping down from leading Twitter.
Moreover, Tesla is clearly different from many other ‘winners’ of the pandemic era. It’s on track to make well over $100 billion in revenue in 2023 and boasts a desirable brand. A ‘hit and hope’ penny stock this is not. Indeed, the share price could conceivably be multiples of where it currently is in a few years.
As things stand, however, I’ll continue drip-feeding my money into the aforementioned Baillie Gifford-managed trust. By spreading my money around many disruptive companies rather than just one, I’m keeping risks in check. Losing sleep over my portfolio just isn’t worth it.
Whether Tesla will fall further in 2023 or stage an explosive rebound is open to debate. But the next 12 months certainly won’t be boring.
