tesla (NASDAQ:TSLA) shares were trading at $29.53 at the beginning of 2020.
This in itself marked an incredible run as it held its IPO in July 2010.
In just a decade, early investors saw shares rise more than 2,000%.
However, even if you missed that initial run, you would have been greatly rewarded if you had invested in early 2020.
The stock has risen 691% since then.
For perspective, if you had invested £10,000 then, you would have £69,103 today. My money would have increased almost sevenfold, which is pretty incredible.
However, is Tesla stock still worth investing in today? Will it generate similar returns in the future?
I will discuss these questions below.
The future of Tesla?
With a market capitalization of just over $740 billion, Tesla is already one of the most valuable companies in the world.
If it grew at the same rate as it has since 2020, it would be valued at more than $5.1 trillion by 2027.
This would make it one of the most valuable companies in history (and almost $2.2 trillion more than Applethe most valuable company in the world today.
In my opinion, this is inconceivable. I don’t simply believe that it cannot achieve this valuation in the next four years. I don’t even think I can make it in the next 10 years.
First of all, it would take monstrous growth to even be in the conversation to justify this.
While it has been able to rapidly grow revenue from £24.6bn at the end of 2019 to £95.9bn in the last 12 months, it is difficult for this level of expansion to continue. Recent news that the electric vehicle market is experiencing a slowdown in growth is one indicator.
Furthermore, in the last quarter, revenue only increased 9% year-over-year.
Second, trade is not cheap. With a price-to-earnings (P/E) ratio of 78, it’s very difficult to see room for its stock to grow.
Unfortunately, I think the ship has passed for investors to generate life-changing returns with Tesla stock.
In fact, I don’t think it will generate any significant returns for investors in the coming years. It’s a very expensive stock that isn’t growing fast enough to justify its valuation.
Stagnant in recent years
I also think it’s misleading to believe that Tesla has been a great investment over the past four years.
It was just a great investment in 2020.
Of the 691% that have returned since the beginning of 2020, 696% were achieved in 2020.
That means it has actually lost 5% from 2021.
I think this sideways share price movement is what we will see in Tesla stock going forward.
For context, the S&P 500 It has been a much better investment in that time period, returning 20%.
Instead, investors should consider looking for the next Tesla. For example, General Motors.
Its CEO, Mary Barra, has claimed that its self-driving subsidiary, Cruise, can reach $50 billion in revenue by 2030 with virtually nothing today. That’s a serious level of growth. Therefore, the AP/E ratio of 4 indicates a potential bargain.
If you also take into account that its market capitalization is only $38 billion and the core business alone already generates over $170 billion, I think there is potential here for Tesla-like returns.
