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American electric vehicle (EV) manufacturer. Tesla (NASDAQ: TSLA ) has seen its stock ride a rollercoaster ride in recent years.
In this article, I’ll look at the company’s prospects moving forward, along with the potentially fatal problems I see on the horizon. First, let’s see how much money we made from the £1,000 invested in Tesla three years ago.
The story of 10x returns
A £1,000 investment in a Tesla three years ago would now be worth £3,829. Not bad, right? But this does not tell the whole story…
Here’s how my investment will change in six-month increments over three years.
| month | Investment | stock price |
| January 2020 | £1,000 | $29.53 |
| July 2020 | £2,729 | $80.58 |
| January 2021 | £9,934 | $293.34 |
| July 2021 | £7,663 | $226.30 |
| January 2022 | £11,592 | $342.32 |
| July 2022 | £7,696 | $227.26 |
| January 2023 | £3,829 | $113.06 |
At one point, Tesla’s share price reached $342.32 and turned a £1,000 investment into almost £12,000. If I believe that the stock price has been assessed correctly, an investment in Tesla could be the bargain of the decade. On the other hand, I don’t want to risk catching a falling knife. So let’s dive into the details.
The best play in the stock market?
Tesla’s dizzying heights are a classic case of first-mover advantage. The company brought the EV that can be used and spread to the market, and it has been rewarded with the current global EV market share of 65.4% in 2022.
Where Tesla really shines, however, is on the vehicle side. One recent analysis puts Tesla’s profit-per-vehicle at $9,570. That’s 8x Toyota’s rival—per-vehicle at $1,200. Tesla’s gross margin for cars of 27.9% is in the bracket of premium car makers like Mercedes and BMW.
With the shift to EVs well and truly underway – 27 EU members last year agreed to ban new ICE (Internal Combustion Engine) vehicles from 2035 – Tesla looks poised to take advantage.
However, there is a big, insidious and irreparable problem that prevents me from investing in Tesla…
Musk’s fatal mistake
Tesla founder Elon Musk recently acquired social media company Twitter and he has spent the time since constantly making headlines. Many think this is a distraction that will take the focus away from Tesla. I think his new antics are a problem, but for another reason.
Tesla is a darling of the left wing. Picture a company with advanced, environmentally conscious electric vehicles. Save the earth, buy a Tesla. However, this is in direct contrast to Musk’s far-right Twitter shenanigans.
A 2022 poll sees 37% of US Democratic voters having an unfavorable impression of Elon Musk. Within a few months, this dropped to 59%. And when you consider that Democrats are more likely to get rid of ICE vehicles than Republicans – another poll with 85% to 46% – I believe Musk is alienating his target market and damaging Tesla’s brand image.
So, I don’t see Tesla stock as a good value for my current portfolio.
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