Up 93% in 2023 already! Could Tesla stock keep going?

Cars made by Tesla (NASDAQ: TSLA ) is known for its rapid acceleration. Plaid’s Model S can go from zero to 60mph in under two seconds. 2023 has seen automakers move quickly in other ways. Since the start of last month, Tesla shares have risen 93%.

That kind of performance is incredible. Can it continue — and should I be piling up on Tesla stock now?

Sales jump

Some stocks have nearly doubled in weeks without transformative news. If the stock market is efficient, stock prices should reflect what investors think the aggregate value of a given company is.

Different investors may have contrasting views. That is particularly relevant for companies with strong growth prospects that can make it difficult to predict future business performance with any accuracy. So, the price of certain stocks can bounce.

But I don’t see the 93% increase adding about $340bn in market capitalization as the ‘bounce’ part.

I also don’t think there is a development from the beginning of 2023 that will almost double the fundamental value of the company. Tesla announced last month that deliveries in 2022 represent an annual growth of 40%. That’s a strong performance — but not unexpected, given that the company has been rolling out shipment numbers for years.

Positive sentiment

So my take on why Tesla stock jumped is that investors are warming to the story again after a period of quick enthusiasm.

After all, even if it almost doubles in 2023, the stock is still 24% below where it was a year ago.

While the business performance is strong, I don’t think it can lead to a big jump in Tesla stock in the last few weeks. In other words, I see the move as reflecting investor sentiment more than business fundamentals.

I didn’t buy it

As a buy-and-hold investor with a long-term approach, I prefer to consider the fundamental value of a company rather than how popular it is in the market at any given time.

Last year Tesla made $12.6bn in net income. That is certainly impressive and reflects a strong growth rate. But it means the business, which has a market capitalization of more than $650bn, trades at a price-to-earnings (P/E) ratio of more than 50.

In fact, the P/E ratio is lower than at some point in recent years. Tesla’s business is doing well, with car sales volumes growing and strong progress in other areas such as large-scale static battery installations.

However, the price still seems high to me. The company faces risks including increased competition and falling prices in the electric vehicle market.

If Tesla bulls continue to focus on good news from the company, I think the stock could see a rally in 2023 even after its meteoric climb thus far. But on a fundamental basis, I don’t see the stock as attractively valued. I will not add it to my portfolio.