Since the beginning of 2022, Tesla stock has lost about half its value, resulting in a very poor performance this year. Numerous obstacles have contributed to this fall, including the U.S. Federal Reserve’s (Fed) multiple interest rate rises, China’s decision to adopt severe restrictions to prevent the spread of Covid-19 in the nation, and CEO Elon Musk’s full-time activity on Twitter.
Elon Musk said the business would begin shipping the first Tesla Semi Trucks. Have you ever wondered if this favorable development offset some of December’s losses for this year? Moreover, what can investors anticipate from Tesla stock in five years? This article explores further information regarding the electric vehicle (EV) maker and analyst forecasts for the future of Tesla stock.
List of Contents
Everything You Should Know about Tesla
Martin Eberhard and Marc Tarpenning, two engineers who desired to revolutionize the automobile business by developing fully-functional, electric-powered automobiles, created Tesla in 2003. Contrary to widespread thought, Elon Musk did not establish the corporation. On the other hand, Musk was critical to Tesla’s success since he put a significant amount of money into the company and assisted it in raising financing from venture capitalists and angel investors.
In addition, the Roadster was Tesla’s first automobile, released in 2008. It then released additional versions such as the Model S, Model X, Model Y, and Model 3. In addition, the business is developing a commercial truck dubbed the Tesla Semi, a passenger pick-up truck named the Cybertruck, and a new Roadster model. Tesla’s headquarters are located in Austin, Texas. Manufacturing facilities are located in the United States (Texas, Nevada, California, and Buffalo), China, and Germany.
During the first nine months of 2022, Tesla generated total revenues of $57.1 billion, $50.2 billion of which came from car sales. During the same period, Tesla manufactured 929,910 vehicles and delivered 908,573 units. Therefore, understanding the company’s history and present status is a useful starting point for developing a credible Tesla long-term prognosis.
Analysis of Tesla Stock Performance
Tesla Monthly Stock Performance
In the past decade, Tesla has witnessed monthly drawdowns of above 20% in six months. This demonstrates the stock’s volatility and the patience required by investors who followed a buy-and-hold strategy to see their holdings’ values climb by the percentages mentioned above.
Tesla’s stock price reached an all-time high of $414.50 per share in November 2021. However, a change in the macroeconomic environment prompted investors to adopt a risk-averse stance owing to the U.S. Federal Reserve’s increasingly hawkish activities. Investors must be aware that previous performance is not indicative of future performance. Therefore, they should not anticipate the price of Tesla stock based on its historical price movements.
Tesla Stock Performance vs. U.S. Indices
During the past decade, Tesla has collected gains of 8,535.4% compared to returns of 348.9% and 187.6% for the Nasdaq 100 and S&P 500 indices, respectively. This indicates that the value of the company’s shares has increased at a compounded annual growth rate of 56.8%. It is an excellent return that has not always been free of setbacks.
Tesla 5-Year Price Drivers
When developing a 5-year prediction for Tesla stock, the company’s fundamentals may be the first factor to evaluate. This includes an examination of the demand for EVs in numerous parts of the world, especially in regions where Tesla now offers its products. However, it is also in potential new areas that the business may soon enter.
In addition, investors should consider the competitors and their actions to determine if their automobiles will eventually cut into Tesla’s market share. In the first nine months of 2022, according to statistics from S&P Global, Tesla vehicles accounted for 65 percent of the unit sales of electric automobiles in the United States. Tesla aspires to become a big player in other latitudes, like China and Europe. They will have to compete with companies such as Nissan, Ford, General Motors, Toyota, Nio, and Xpeng to either become the leaders of the EV industry in these latitudes or maintain their position as the market leaders.
By analyzing these factors, investors may be able to estimate Tesla’s sales, cash flows, and earnings over the next five years to value the company using price-to-earnings ratios and similar methodologies. Significantly, macroeconomic factors such as interest rates might influence the price of Tesla shares in five years, as higher rates often result in lower equity values. Moreover, rising interest rates may reduce the automobile market as borrowing prices tend to rise.
Tesla Stock in the Next 5 Years
As of December 2, MarketBeat reported that the average analyst rating for Tesla stock was on hold. Despite the fact that 20 of 36 experts ranked the stock as a buy, five analysts rated it as a sell, resulting in a neutral view. The average price objective for Tesla for the next 12 months was $278.43 per share, representing a potential upside of 43% if this target is reached. The highest estimate per share was $526.67, while the lowest was $33.33.
Analysts have been observing Musk’s recent transactions with Tesla shares as part of the needed funding to acquire Twitter. Musk’s stock sales may have lowered Tesla’s share price to the point that the company is temporarily trading below its intrinsic worth.
Morningstar Analyst Seth Goldstein’s Comment
“After the market closed on November 8, Tesla SEC filings disclosed that CEO Elon Musk sold 19.5 million Tesla shares from November 4 to November 8.” The $3.95 billion worth of shares sold was presumably utilized as a part of the permanent financing package to support Musk’s October 28 acquisition of Twitter.
Wallet Investor, a third-party forecasting service, has projected that Tesla stock will reach $624.57 a share during the next five years. In addition, Gov Capital, an additional algorithm-based forecasting company, offers a 5-year estimate for Tesla shares of $1,534.22. If these projections are met, Tesla has a substantial upside potential over the next five years.
Conclusion
Nevertheless, a great deal may occur throughout that time frame. These predictions should not be interpreted as a suggestion to invest in Tesla stock. Before investing money, investors are recommended to conduct their due research on this company. Significantly, you should never invest more than you can afford to lose.
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Read more: Stocks
Source: Capital.com