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It’s been almost 15 years since Tesla (NASDAQ:TSLA) shares made their debut in the stock market. And for the investors who’ve held on throughout this period, a lot of wealth’s been unlocked.
Tesla’s hardly been the most stable of stocks. However, the electric vehicle (EV) manufacturer’s transformed itself from a niche operation to a full-blown automotive giant. And that’s despite having to fend off intense competition from long-standing industry titans with considerably more capital at hand.
So how much money have investors made? And is it too late to jump aboard the gravy train?
A millionaire-making stock
Since the IPO in June 2010, Tesla shares have been split several times. But on a split-adjusted basis, the EV share price has grown to just shy of $400 – a 31,334% return, or a 46.7% annualised return. That’s almost five times more than the US stock market’s delivered over the long run and more than twice billionaire investor Warren Buffett’s stellar track record.
In terms of money, a £5,000 initial investment is now worth just shy of £1.6m!
Is it too late to buy?
For investors hoping for another 300x return from Tesla, that doesn’t seem very likely. After all, the stock already has a market capitalisation of $1.25trn, and it would have to reach more than $300trn to deliver such returns. For reference, there’s only around $80trn in the current global money supply.
However, that doesn’t mean it isn’t capable of delivering solid returns for investors today. The company’s begun diversifying its portfolio into technologies such as energy storage and EV recharging infrastructure. This not only reduces reliance on the cyclical automotive sector for revenue but also opens the door to new growth opportunities.
In the meantime, with CEO Elon Musk building close ties to the incoming Trump administration, Tesla could benefit significantly from higher tariffs on Chinese competitors as well as reduced regulation on self-driving cars.
In other words, Tesla’s growth story doesn’t appear to be over. And while the stock will undoubtedly remain volatile, in the long run, the business looks primed to thrive. That’s why I think investors may want to give it a closer look. Having said that, it’s far from a risk-free investment.
What to watch out for
Until recently, Tesla’s operated with relatively little competition from within the EV space. Today, the market’s getting increasingly crowded. US tariffs against China might help mitigate competition in America. However, such protections don’t exist in other markets where Tesla operates, such as Europe, Australia and, of course, China. And even in the US, other automotive businesses like General Motors have begun building their own competing EVs.
In my opinion, competition’s only going to get increasingly more intense from here. And while Tesla’s seemingly in the lead today, management’s going to have to continue allocating capital wisely to stay ahead of its rivals.
