The Surprising Tesla Stock Saga: The 20-Month Performance Odyssey that’s Down Substantially
Who made money owning Tesla?
Between early May of 2022 and early January of this year, the value of Tesla shares fell almost 18%. Yes, Tesla shares actually declined in value over the past 20 months, which might be surprising for many who just assume Tesla stock is always rising like the company’s growing EV sales.
May 2022 is an important starting point for valuing Tesla shares for me. That is the date when I sold all of the Tesla stock I owned at the time. I assumed then that it would be difficult for Tesla shares to climb back to their once lofty level of a $1.2 trillion valuation. It became apparent to investors like me that Tesla was less of a technology company, and more of being just an automaker. Of course, Tesla had become the automotive force leading the automotive category into a disruptive EV future. Yet, other than producing EVs versus ICE vehicles (internal combustion engine vehicles), what really was the difference between Tesla selling 10 million vehicles in the future and Toyota, which was already selling 10 million vehicles? How could investors justify a Tesla valuation that was significant multiples higher than Toyota?
Many Tesla bulls believed Tesla’s higher margins at the time are what justified a large and increasing valuation. Yet, as we learned during 2023, Tesla was forced to lower its vehicle prices and slash its margin advantage in response to slowing EV demand, just like any traditional automaker facing slowing demand.
I and others originally assumed that Tesla would pioneer the introduction of a new revenue-generating, robotaxi business based on its autonomous driving technology. In fact, investors like Tasha Keeney of ARK Invest believed Tesla would reach a valuation of $4.6 trillion based on this self-driving technology. While Tesla may one day establish technical robotaxi capability, increasingly it seems that type of Amazon AWS-like, incremental new business is far into the future, and will not appreciably impact Tesla’s business any time soon.
How I made a substantial return on Tesla shares?
The impetus for me to acquire Tesla shares during November 2018 was the company solving its challenges with mass producing its first volume vehicle, the Model 3. Once Tesla became a mass producer of that EV, I assumed correctly that investors would drive the stock price higher over time. With the introduction in 2020 of the company’s second volume car, the Model Y SUV (now the top-selling vehicle in the world), investors drove the valuation of Tesla to a nearly unbelievable $1.2 trillion during November 2021. At that time, I asked myself a simple question, “How can Tesla, selling approximately 1 million vehicles then, have a valuation 5X that of Toyota, which was already selling 10 million automobiles?”
Thus, I began selling Tesla shares because I believed the stock not only was overvalued, but that other investors would soon come to the same conclusion (See Additional Notes below for more details about my Tesla share acquisition and sales).
How did Tesla shares perform for me? The three-and-a-half years between my original purchase of Tesla stock in 2018 and my final sale of shares in 2022 produced an 889% total return, and a 182% dollar weighted annualized return, much better than the past 20 months performance in the stock.
Additional Notes
Acquired Tesla shares during November 2018
Acquired more shares during January 2020
Sold shares during January 2021, June 2021, November 2021, and January 2022
Sold all remaining shares during May 2022
Disclaimer
TaaSMaster, LLC is not a registered investment advisor or broker/dealer. All investment opinions expressed by TaaSMaster, LLC are from personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors may occur.