Tesla Inc. has been included in the S&P 500 index for three years. Tesla's shareholders have been investing like crazy ever since, but the company's share price performance has investors wondering if it would be better to put their money into the index. On December 18, 2020, Tesla's stock price closed at around $232, after which the company joined the S&P 500 index. The company's current share price is around $247, which is only $67%。In contrast, in Microsoft, Apple, and Nvidia (NVDAUS) and other large technology stocks, the S&P 500** is up about 27%. Tesla is the seventh most weighted in the S&P 500 and is in the bottom half of the S&P 500 over the same period.
Craig Irwin, an analyst at Roth Capital Partners, said in an interview: "Tesla was overvalued when it entered the S&P 500, so it's no surprise that its share price has underperformed, and it will likely continue to do so for years to come." Trading with volatility is the right strategy to make money on this one at the moment. ”
In fact, Tesla's lackluster three-year returns have beset its extremely volatile moves. At one point, the stock was nearly 80% larger than it was before it joined the S&P 500, and at other times, it was less than half of that.
Tesla's stock price has strong upside resistance in the future.
Looking ahead, Tesla's challenges are likely to be even greater as EV demand cools. Even if the company's dominance in the sector (which could make it the only viable bet for investors in the sector), it may not be enough to boost its share price in the coming years.
Still, Tesla's optimism** ahead of its entry into the S&P 500 has led some investors to accept the stock's weak performance. As of December 18, 2020, the company's share price was up a staggering 731% in 2020, as the expectation that the company would soon achieve blue-chip status attracted institutional and ** investors.
Tesla's presence in the S&P 500 index means that many managers have to be aware of some of the company's problems – Tesla's volatility, the company's "frequent PR mishap" CEO Elon Musk, and headwinds in the emerging EV industry. For ** that tracks the index, portfolio managers are asked to buy Tesla's ** to reflect the new composition of the index.
Jerry Braakman, chief investment officer at First American Trust, said: "Passive index investors who invested after 2020** did not see great returns, given the volatility. But with a slight change of starting point, it's clear how much value you can create by owning Tesla. ”
The question now is how much room the company has for its market valuation, which is already far higher than that of other automakers, similar to the biggest tech companies. The current consensus on Wall Street seems to be: maybe not. Analysts' average price target for Tesla reflects their expectation that the stock will be around 24%。This is not surprising, as demand for EVs is widely expected to subside in 2024 and then pick up again.
In recent months, car companies, including Tesla, electric car dealers, and even car rental companies have said that the first adopters of the technology appear to have dried up, with a host of issues such as the economy, expensive cars and high interest rates putting mainstream buyers off.
There's also hope that Tesla will be able to build a truly self-driving car before anyone else. As Datatrek Research analyst Nicholas Colas put it, about two-thirds of the company's valuation depends on the success of its "fully self-driving" technology.
But there are also some problems that arise as well. The most recent setback came last week, when the top U.S. auto safety regulator said the system wasn't doing enough to prevent errors, and Tesla said it would recall more than 2 million vehicles. "Tesla's valuation, volatility and potential future returns are inextricably linked to its ability to deliver truly autonomous vehicles," Colas said. Investors who believe this will happen will hold the stock. Those who doubt that Tesla will be able to reach the finish line first or second will not think so. At the moment, this is quite a binary investment case. ”
This article is from: Zhitong Finance and Economics.