Tesla (NASDAQ:TSLA) stock have rewarded long-term shareholders with astounding gains. Baron Capital is one of them. Its CEO, Ron Baron, told CNBC his firm’s investment had ballooned twentyfold since acquiring $380 million in TSLA stock. Now $6.2 billion, the holding represents nearly 13% of Baron Capital’s assets under management, making it a highly concentrated position. But Ron remains unconcerned by the size and thinks there’s more to come.
He told CNBC’s Squawk Box that he believes this is just the beginning for Tesla: “I think we’re going to make three, four, five times our money on Tesla from here.”
Over His Skis in TSLA stock
Baron Capital deserves loads of credit for having the foresight and patience to allow its Tesla stock investment to double many times over. Most investors would have rung the register long before now. But further upside is going to be much more challenging from here.
It may seem like a triple is easy for a stock that’s delivered way larger gains in the past, but Tesla is running up against size constraints. Its market capitalization has already swelled beyond $1 trillion, making the electric vehicle king the fifth most valuable company in America.
As for making 5x their money from here, do the math. Tesla’s market cap would have to eclipse $5 trillion, which is utter insanity. It wouldn’t just dwarf every other automaker (it already does!); it would be bigger than any other public company on the planet. It’s not the holding to 2030 and beyond that bothers me. I’d expect such a long time horizon for a shareholder who’s been so richly rewarded for their patience, but quintupling from here seems far too starry-eyed.
Not that fundamentals have ever mattered to Tesla or its owners, but it’s also worth noting that the P/E ratio is already north of 200. It’s impossible to know how much future growth has been priced-in, but it certainly feels like we’ve baked in a lot at these lofty levels.
On the date of publication, Tyler Craig did not have (either directly or indirectly) any positions in the securities mentioned in this article.
