A common argument among the bears is that Tesla Inc (NASDAQ:TSLA) has jumped too far, too fast. On the surface level, it’s difficult to see otherwise. Year-to-date, TSLA stock has smashed expectations with a glass-shattering 45% return.
Assuming nothing trips up almighty Tesla and its flamboyant CEO Elon Musk, we’re easily on our way to triple-digit gains. But at a time when the technology sector is see-sawing, is buying TSLA shares the right move?
I completely understand the apprehension. Since becoming a publicly traded entity, Tesla stock only enjoyed one triple-digit annual return. Back in 2013, TSLA shares were the toast of Wall Street, ripping open a 325% gain for investors as the average share price surged from around $31 in 2012 to more than $104 the following year. Because of this single, monster gain, Tesla annual returns average nearly 60%.
That’s a figure that should arouse serious investor confidence. However, outside of 2013, TSLA stock really hasn’t lived up to its market potential. A prime example is when you discount its monster year. Performing this exercise nets an annual average return of 15%. That 15% is certainly better than the benchmark indexes, but let’s face it — people aren’t jumping on Tesla merely to be better. Like their uber-gorgeous Roadster, they want astoundingly superior.
I sympathize with some analysts’ warnings on the current rally. It looks like a flash-in-the-pan, based purely on Tesla stock and its historical performance.
But I truly believe that the bears are ignoring one of the basic, fundamental drivers of Tesla. This ridiculously simple concept could very well push TSLA stock to InvestorPlace contributor’s Will Ashworth’s $1,000 target.
Tesla Solved a fundamentally Important Question
Over the years, I developed a reputation of being somewhat of a wonky, numbers guy. In a way, this describes finance to a T. But behind all the fancy charts and figures, we have to identify what core factors catalyze a particular investment.Great businesses solve great problems.
For me and millions of car enthusiasts, Tesla boldly answered one of our lingering questions: why do electric and hybrid vehicles have to be so hideously ugly? Is this part of a secret conspiracy within the automotive industrial complex? Perhaps good-looking EVs would be a threat to fossil-fueled automakers and a giant middle-finger to the petro-dollar?
All joking aside, I’m willing to save the environment alongside any tree-hugging yuppie. But I’m not going to do it in that. And by that, I mean the intractably boring Toyota Motor Corp (ADR) (NYSE:TM) Prius, or the what-were-they-smoking Nissan Motor Co Ltd (ADR) (OTCMKTS:NSANY) Leaf.
Tesla finally proved that style and environmental advocacy do not have to be mutually exclusive concepts. Eventually, TSLA stock caught up to the enthusiasm. The reason why it took so long for TSLA shares to move was because the concept of non-embarrassing EVs was being tested. Recall that the monster year of 2013 was when the Tesla Model S started gaining traction worldwide.
Once the light bulbs went on and people realized the corporate strategy’s feasibility, Tesla stock became a horse race.
TSLA stock is an Investment in Progress
Shortly after 2013, TSLA entered into a prolonged, consolidation pattern. Again, I believe the markets were patiently waiting out whether or not the EV concept would work. Fossil-fueled machines from General Motors Company (NYSE:GM) and Ford Motor Company (NYSE:F) are still the dominant players. Beating them would take something special.
Click to Enlarge One of the reasons why 2017 has been such a standout is because Wall Street has finally accepted that Tesla represents the future.
Whether we are talking the electric “fuel” source, or the automated driving features that even the government wants implemented quickly, TSLA stock is about progression. Unless the traditional automakers play catch-up, they’re in the regression game.
So I’m not surprised at all that Tesla is rewriting the rule book, just like I’m not surprised that Amazon.com, Inc. (NASDAQ:AMZN) has fundamentally shifted retail.
You’ll recall that Amazon was often criticized in its early years for not being profitable. Many are regretful for missing that boat. Eventually, those wavering on Tesla stock now may also feel this same regret.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
