This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
Key Points
- Tesla’s long-term growth trajectory has been a key factor driving the stock higher.
- Investors believe that Tesla’s future will be all about autonomous driving and robotics.
- Even though shares trade well below their peak, they look very expensive at current levels.
Companies that challenge the status quo can reap huge rewards. This is precisely what Tesla (NASDAQ: TSLA) has done. In an effort to drive the world toward sustainable energy, the business has developed a fleet of popular high-performance electric vehicles (EVs). Consequently, Tesla has disrupted the global auto market.
Shareholders have gained tremendously, despite a volatile ride. If you'd invested $500 in this EV stock five years ago, here's how much you'd have today.
Buying what Musk is selling
Tesla has registered monster growth throughout its history. This key factor is what has propelled the stock to new heights. Shares have accelerated 185% higher in the past five years (as of Sept. 10). This would've turned a $500 starting sum into $1,424 today. This is despite the fact that the stock currently trades 28% below its peak from December 2024.
Anyone who follows the business knows that the market buys what founder and CEO Elon Musk is selling. Yes, Tesla sells well-designed and tech-forward EVs. Based on the stock's incredible performance, however, investors are convinced that the company will one day find huge success with autonomous driving and robotics. This could boost Tesla's finances.
Tesla: Back to reality
Introducing a global robotaxi fleet or selling lots of humanoid robots to customers is far from a certainty, though. But Tesla shares, which trade at a nosebleed price-to-earnings ratio of 201, reflect flawless execution in the years ahead. It's safe to say that the stock is overvalued.
And this is at a time when the company is struggling mightily. Revenue is down. In August, Tesla's market share of new EV sales in the U.S. was the lowest since 2017. And margins are taking a hit.
Investors can't complain about the trailing-five-year return. However, the next five years might not be so kind.
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
