The American electric vehicle (EV) manufacturer Tesla (NASDAQ:TSLA) has seen its stock go on a rollercoaster ride in recent years.
In this article, I’ll look at the company’s prospects moving forward, along with one potentially fatal problem I see on the horizon. First, let’s see how much I’d have gained from £1,000 invested in Tesla three years ago.
A story of 10x returns
A £1,000 investment in Tesla three years ago would now be worth £3,829. Not bad, right? But that doesn’t tell the whole story…
Here’s how my investment would’ve changed in six-month increments over the three years.
| Month | Investment | Share price |
| Jan 2020 | £1,000 | $29.53 |
| Jul 2020 | £2,729 | $80.58 |
| Jan 2021 | £9,934 | $293.34 |
| Jul 2021 | £7,663 | $226.30 |
| Jan 2022 | £11,592 | $342.32 |
| Jul 2022 | £7,696 | $227.26 |
| Jan 2023 | £3,829 | $113.06 |
At one point, Tesla’s share price reached $342.32 and turned that £1,000 investment into nearly £12,000. If I believed that share price was correctly valued, an investment in Tesla could be the bargain of the decade. On the other hand, I don’t want to risk catching a falling knife. So let’s dive into the details.
The best play on the stock market?
Tesla’s dizzying highs are a classic case of first-mover’s advantage. The company brought the first usable and widespread EVs to market, and has been rewarded with a current global EV market share of 65.4% in 2022.
Where Tesla really shines, though, is in the margins on its vehicles. One recent analysis put Tesla’s profit-per-vehicle at $9,570. That’s 8x its rival Toyota’s profit-per-vehicle of $1,200. Tesla’s gross margins for its autos of 27.9% put it in the bracket of premium car manufacturers like Mercedes and BMW.
With the shift to EV well and truly underway — the 27 members of the EU last year agreed to ban new ICE (Internal Combustion Engine) vehicles starting from 2035 — Tesla seems well poised to take advantage.
However, there is one huge, insidious and irreparable issue that is stopping me from investing in Tesla…
Musk’s fatal mistake
Tesla’s co-founder, Elon Musk, recently acquired the social media company Twitter and he’s spent the time since perpetually in the headlines. Many think this is a distraction that will take his focus away from Tesla. I think his recent antics are a problem, but for a different reason.
Tesla was a left-wing darling. The image of the company with its electric-powered vehicles was forward-thinking and environmentally conscious. Save the earth, buy a Tesla. However, this is in direct contrast to Musk’s right-leaning Twitter shenanigans.
A 2022 poll saw 37% of US Democrat voters had an unfavourable impression of Elon Musk. Within a few months, this dropped to 59%. And when you consider that Democrats are far more likely to be in favour of phasing out ICE vehicles than Republicans — another poll putting it at 85% to 46% — I believe Musk is alienating his target market and ruining Tesla’s brand image.
As such, I do not see Tesla stock as good value for my portfolio right now.
