- Justin Harper
- Business Correspondent, BBC News
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4 hours
Image source, Getty Images
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Shares of Elon Musk’s electric car company have risen more than 700% during 2020.
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The incredible rise in Tesla’s stock price this year created a new club of the rich, calling themselves “Teslanaires,” a play on the company’s name and “billionaires,” which in Spanish refers to billionaires.
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Shares in Elon Musk’s electric car company have risen more than 700% during 2020, making it the most valuable auto company in the world.
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But it has been a roller coaster ride for long-term investors who put their money into the firm, due to the ups and downs that stocks have experienced since the company entered the stock market a decade ago.
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For those who achieved resist volatilityIt has been a journey to riches.
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This month marked a milestone for the car company when it entered the S&P 500, a stock index that includes the stocks of companies like Apple, Microsoft and Facebook.
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So high did Tesla’s shares rise that the firm became one of the 10 most valued companies in the index.
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And not only that. Tesla shares are now priced higher than the combined valuation of General Motors, Ford, Fiat Chrysler Automobiles and Toyota. Yet Tesla makes only a fraction of the vehicles that its more established rivals have sold for decades.
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“Tesla is a very polarizing stock. It has its followers, many of whom are Tesla car owners, and a fair amount of critics, particularly in the financial community, who say that the company’s stock is overvalued“says Will Rhind, CEO of investment firm GraniteShares.
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“Investors who bought stocks in the beginning have done very well and as a result some are now millionaires.”
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Image source, Getty Images
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Critics say the company’s stock is overvalued.
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Much of Tesla’s share price growth is due to increased car sales, driven by strong demand from China and hopes for subsidies for electric vehicles.
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The shift to electric cars globally has put auto companies like Tesla in a prime position. Many investors also believe that strong growth is expected in other parts of Tesla’s business, including its autonomous driving software and electric batteries.
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An overrated company?
Tesla went public in June 2010 with a price of US $ 17 per share. This week, that price hit more than $ 650.
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With that gigantic jump in stock value – which also continued to rise during the covid-19 pandemic – critics of Tesla say it is overvalued.
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In a report released earlier this month, analysts at JPMorgan noted that by using virtually all conventional metrics, Tesla shares “are not only overvalued, they are radically overvalued.”
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Image source, AFP
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Tesla went public in June 2010 with a price of US $ 17 per share. This week, that price hit more than $ 650.
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But other investment experts argue that Tesla should not be viewed as a car company.
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“Part of the appeal of Tesla to many investors is that the firm is more than a car company and the success of its batteries will open up many sources of income,” says Edward Moya, market analyst senior the OANDA.
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“Think about the role Tesla is playing in the transition from fossil fuels to electrical energy and storage. In that sense, the question for today’s investors is, how do you value tomorrow’s technology? “
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Tesla also sells solar panels and storage batteries for homes.
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Los “Teslamillonarios”
There is a veritable army of fans who strongly believe in Tesla and predict that the share price will continue to climb, convinced that Elon Musk’s company has a bright future.
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Image source, Jason DeBolt
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Jason DeBolt invested $ 19,000 in Tesla and now has stocks worth an estimated $ 10 million.
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One of them is Los Angeles engineer Jason DeBolt, who made his first investment in Tesla by buying 2,500 shares at a cost of $ 19,000.
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“I started investing in Tesla in 2013 after buying a Tesla Model S and taking a factory tour,” he says. Since then, he has continued to buy more shares, and the 15,000 he now owns are worth close to $ 10 million.
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He agrees that as a long-term investor he has been on a roller coaster ride and explains that “it was very difficult to see the media attack Elon and Tesla. That was worse for me than the stock price drop, as I knew that he would eventually recover. “
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DeBolt is a member of the Tesla Shareholders Club and he is regularly in contact with other investors through the Facebook group.
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Another experience is that of Scott Tisdale, who lives in New York. He started investing in Tesla when he first saw the Model S in 2013 and has so far accumulated around 4,000 shares, the current value of which is close to $ 2.8 million.
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Image source, Scott Tisdale
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“I’m not done investing yet because I think the real story is about to begin,” says Scott Tisdale.
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“I’m not done investing yet because I think the real story is about to begin, and people have been saying that stocks are overvalued since before I started buying them,” says Tisdale.
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“It is incredible to belong to this growing group of ‘Teslanaires’. It is almost as satisfying as telling naysayers that I was right.”
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What’s coming
Experts say that Tesla’s share price is unlikely to see more than 700% growth again next year, limiting the number of new “Teslanaires.”
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They also point to growing competition from companies such as Apple, which has revitalized its plans to build an electric car alongside their Chinese rivals.
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“Tesla’s competition has bigger pockets and can afford to take bigger risks,” explains OANDA’s Moya.
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On the other hand, experts also warn about the risk of putting all the money in a single company and recommend investing the funds in different companies.
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