Tesla (NASDAQ: TSLA) stock has always had its fair share of doubters. Over the years, many investors have predicted that it will eventually crash and burn.
The stock has continually proved doubters wrong, however. Here’s a look at how much money someone would have today if they’d invested $1,000 in the electric vehicle (EV) company at its initial public offering (IPO) 15 years ago.
Huge gains
Tesla’s IPO took place on 29 June 2010. The IPO price was $17, which, adjusted for stock splits, equates to a share price of just $1.13 now.
Fast forward to today and Tesla’s share price is sitting at $304 as I write this. That means that $1,000 invested in the company at the IPO would now be worth about $269,000.
It’s worth noting that last year, Tesla stock hit an all-time high of $488. At that point, the $1,000 investment would have been worth a whopping $432,000.
Whether we focus on today’s share price or the all-time high, we’re talking about huge, life-changing gains here. Ultimately, the stock has been a phenomenal long-term investment.
Note that, according to CNBC, $1,000 invested in the S&P 500 index at the time would today be worth a little under $6,000 (a good return). So, Tesla’s gains highlight the power of stock picking.
The potential from here
Can the growth stock continue to reward investors with monster gains? Some investors believe so.
ARK portfolio manager Cathie Wood, for example, currently has a 2029 price target of $2,600 for the stock – roughly 8.5 times the share price today. She believes that full self-driving (FSD) technology and robotaxis will allow the company to scale up rapidly.
I’m not so sure that FSD technology is going to lead to huge gains for investors, however. The reason is that today, this is a very competitive space.
Already, Alphabet’s Waymo has done more than 10m paid autonomous taxi rides in the US. So, it has a huge head start on Tesla in the robotaxi race.
Meanwhile, a ton of other companies are now launching self-driving vehicles including Volkswagen, Amazon (which owns Zoox), and BYD. Last month, Volkswagen said it plans to have its self-driving cars in production next year while Amazon said it plans to deliver 10,000 autonomous vehicles annually in the near future.
Given this level of competition, it’s a very different environment for Tesla, and its investors, than it was 15 years ago when it did its IPO. Back then, there were basically no EVs on the road so the company pretty much had the whole market to itself.
Looking ahead, it’s likely that Tesla will have to compete with a range of innovative companies. This will have implications for its potential market share and ability to generate profits.
Worth considering?
One other issue for me is that a lot of growth is already priced into the stock. Currently, Tesla trades on a forward-looking price-to-earnings (P/E) ratio of about 170, which is very high.
Given this high valuation, and the level of competition the company is facing, I’m not confident that the stock has the ability to deliver strong returns in the years ahead. It could still be worth considering if one believes in CEO Elon Musk and has a long-term view, but to my mind, there are better growth stocks to consider today.
