Up 50% in a month! What’s going on with Tesla stock?

The Tesla stock has increased by half in just one month. Christopher Ruane considers some pros and cons of adding the carmaker to his portfolio.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Illustration of flames over a black background

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Over the past five years, Tesla (NASDAQ: TSLA) has been an incredible share to own, increasing in value by 1,505%. But even over the past month alone, Tesla stock has soared 50%.

That means that if I had invested £10,000 in Tesla in the first half of June, I would already be sitting on a holding worth around £15,000.

Created with Highcharts 11.4.3Tesla PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

What has driven this sudden price surge – and ought I to join the ride ahead of the latest quarterly production and sales numbers, due out this month?

Should you invest £1,000 in Tesla right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Tesla made the list?

See the 6 stocks

Investors are out in force

In short, the Tesla stock price has gone up for a simple reason. Lots of people want to buy it! There has not been any large-scale news about the fundamentals of the business performance over the past month that I think could justify the surge in price we have seen.

The last significant news was the release of a first-quarter update in April. The shares fell 15% in the several weeks following those numbers, suggesting the market was underwhelmed by them. No wonder. Revenues fell 9% year on year, while automotive revenues were down 13%. The gap is explained by growth in the energy storage and services arms of the carmaker.

Net income attributable to common stockholders more than halved. Positive free cash flow in the same quarter last year was replaced by a negative free cash flow of $2.5bn this time around.

Valuing the potential

Still, am I missing something?

A 50% rally does not typically come out of nowhere. Tesla is not some minnow in a neglected corner of the stock market, but a closely watched business with a market capitalisation north of $800bn.

My theory is that investors are going back to the fundamentals of the investment case for Tesla stock. Strong growth in services revenue shows the potential for Tesla to make that a critical profit generator for its business, as Apple and others have done.

Growth in energy storage underlines the progress Tesla is making in that field. It has sizeable competitive advantages in energy and can benefit from rising customer demand.

Meanwhile, a decline in automotive revenues and deliveries can be explained away by the increasingly fierce competition in the electric vehicle market. That is inflicting pain now, in terms of lower pricing and lower profit margins. It may also explain the lower volumes. But if it forces weaker players to exit the market at some point, it could ultimately benefit those left standing.

Not the right value on offer for me

Still, as a long-term investor, not a trader, the current price tag the stock does not look like a bargain to me.

I think it has a wide array of competitive advantages, from its proprietary technology to a large installed used base. But so far, business this year has been challenging and I think that could continue for some time yet.

A price-to-earnings ratio of 67 does not properly reflect those risks, I feel. So I will not be adding Tesla to my portfolio.

But what does the head of The Motley Fool’s investing team think?

Should you invest £1,000 in Tesla right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Tesla made the list?

See the 6 stocks

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

C Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended Apple and 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.

More on Investing Articles

Investing Articles

Prediction: 12 months from now, £5,000 invested in Tesla stock could be worth…

Tesla stock has endured a miserable year so far, falling by 29%. Muhammad Cheema takes a look at how it…

Read more »

Investing Articles

See what £10,000 invested in Tesla shares at their mid-December peak is worth today 

As the world absorbs the full scale of Donald Trump's tariffs, Tesla shares are reeling. Investors who bought the stock…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Dividend Shares

2 ‘safe’ LSE dividend stocks to consider as global markets sell off

As global markets experience high levels of volatility due to economic uncertainty, investors are piling into these ‘safe-haven’ dividend stocks.

Read more »

Investing Articles

US stock market rout: an unmissable opportunity for investors?

His tech-heavy portfolio has been smashed by Trump’s tariffs. However, Dr James Fox believes there could be some opportunities in…

Read more »

Investing Articles

After a 13% ‘Trump tariff’ fall, is the Barclays share price too cheap to miss?

Does the Barclays share price fall mean we should all panic and run screaming from the stock market? Nah, of…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

2 investment trusts to consider for a Stocks and Shares ISA

These two investment trusts have a different focus -- but our writer sees both as worth considering, one more for…

Read more »

Investing Articles

Deutsche Bank reiterates Buy rating on 9.6% yielding FTSE 250 stock that was “most shorted in UK”

Our writer investigates why a major broker remains optimistic about a FTSE 250 stock that was once the most shorted…

Read more »

Investing Articles

2 things to remember when stock markets are turbulent

US trade policy has rattled the stock markets in New York, London and elsewhere. Our writer outlines a couple of…

Read more »