It’s hard to get your head around the US at times. Seeing the world’s richest man dance on stage with the upcoming leader of the country just before an election is hard to fathom. I can’t picture whoever the UK equivalent is of Elon Musk doing the same thing. And I certainly can’t imagine Keir Starmer having a signature dance. Alas, I own Tesla (NASDAQ: TSLA) shares, so it’s the kind of thing I feel I should pay attention to.
A £10,000 stake
This year has been a wild ride for the share price of the electric vehicles company. In April the stock dropped to $142, a 52-week low. Sales had slowed. Optimism around non–ICE (internal combustion engine) vehicles was waning. All the while Chinese manufacturers like BYD were breaking sales records.
In spite of the malaise, I didn’t believe the long-term investment case for Tesla had diminished much, if at all. I didn’t sell, and what a good decision that has turned out to be. The shares have surged since, helped along by its owner’s proximity to the new leader of the free world no doubt, and have reached $358 on the day that I write this.
To highlight the extent of the transformation, a £10,000 stake invested at that low point would now be worth £25,152. That’s approaching a tripling in value in just over six months. Yes, there was a degree of fortune here courtesy of the election result, but I think it still highlights the potential for looking at stocks that have taken a bit of a battering.
Am I buying more of the shares today? No. The recent surge has left me with a lot of exposure that I don’t wish to increase unless I think I’m getting a complete bargain. The price-to-earnings (P/E) ratio of 96 and a forward P/E of 102 suggests we are not close to bargain territory, not on current growth forecasts anyway.
Grand scale
Over the long term, I do expect Tesla to become a very important company. This was highlighted by the December update to its autonomous-driving technology, Full Self-Driving. Among the new features include the ability for cars to back out of a parking space unaided.
Some predictions expect this tech to surpass human capabilities in 2025. Tesla’s mooted ‘robotaxis’ could enter the market not long after that.
That might sound far-fetched but not to anyone who has taken Google’s Waymo taxis in San Francisco, Phoenix or Los Angeles. Driverless taxis already roam these cities 24/7 ready to be flagged down by anyone who needs a lift. It seems inevitable this stuff will get rolled out on a grand scale at some point, and if and when it does, Tesla could be one of the main beneficiaries.
