Once again, the annual deadline for ISA contributions has rolled around. That has got me thinking about how some leading shares have fared over the past year. For example, one-time stock market darling Tesla (NASDAQ: TSLA) has taken a hammering over the past year. As an investor though, what can I learn from the performance of Tesla stock in the year since the last ISA contribution deadline?
The stock has soared in the past year!
This is not merely a theoretical question for me. I think Tesla has a lot going for it, from its large installed user base to proprietary technology and a booming energy storage division.
If I could buy the stock at what I thought was an attractive valuation, I would be happy to own it. So I have been keeping an eye on the price to see whether it reaches a point I think offers me the right amount of value.
A lot of attention has been paid to the crumbling price over the past few months. Tesla has crashed 44% since December.
The longer term, picture, though, remains positive.
Over the past year, Tesla has gained 59%. So £20K invested in it a year ago would now be worth around £31,750.
Ongoing growth prospects – and concerns
There has been no dividend during that period. Tesla has never declared a dividend despite being profitable.
Instead, it puts excess cash to work back within the business. That is fairly common practice for growth companies.
Tesla has a lot of growth opportunities. Updating and expanding its range of vehicles and selling higher volumes is one. But there are others, from the energy storage division to as-yet-unlaunched products like driverless taxis and robots.
The first quarter was a great one for the energy business. Tesla announced this week that it deployed 10.4GWh of energy storage products in the first three months of this year. That was a big jump from the same period last year
Car delivery volumes, by contrast, fell 13% year on year (and production fell 16% but was still markedly higher than deliveries).
The stock price crash of recent months partly reflected investor concerns about weaker sales, as rivals like BYD ramp up sales and Tesla’s brand continues to be impacted in some markets by the high public profile of boss Elon Musk.
The share price still looks high to me
Clearly, Tesla has a tough sales challenge on its hands.
But it has large economies of scale, a proven vertically integrated model and much longer experience than some rivals. I continue to see this as a solid business with a potentially strong future.
I was not ready to invest a year ago because I felt it was overpriced. What about now?
Tesla trades on a price-to-earnings ratio of 131.
That still looks very expensive to me especially for a company with a challenging competitive environment that is seeing sizeable sales falls in its core business.
I will continue to keep the stock on my watchlist without buying for now.
