Is It Too Late To Buy Tesla Stock?

Is It Too Late To Buy Tesla Stock? After decades spent trying to gain a foothold in the market, electric vehicles (EVs) have come into their own at last.

A variety of companies are competing for industry leadership positions, from established automakers like GM to startups like Fisker (FSR). Even Apple (AAPL) is getting in on the action, with news agencies reporting that iCar development is well underway. 

While these relative newcomers to the world of EV are launching their projects, Tesla is at the top of its game. Founded in 2003, Tesla has been hard at work perfecting advanced electric vehicles that are both appealing and affordable enough to go mainstream. 

The company reached a tipping point in 2020, and share prices shot straight up. Those who invested early and waited patiently through the lean years became millionaires overnight, and for a brief moment in early 2021, CEO Elon Musk was the richest man in the world. 

Tesla’s stunning 2020 rise means shares are now trading at a hefty premium. By Q1 2021, the price-to-earnings ratio were 1,255x.

Though some analysts still think Tesla is a buy, many are not convinced. They see a correction coming, which would mean heavy losses for those who buy now. So, the question every investor wants answered is this: Is it too late to buy Tesla stock? 

Tesla Share Price History

Under the leadership of Elon Musk, Tesla stock inched along until early 2020. Then suddenly, share prices shot up, moving from just under $90 at the start of the year to more than $700 per share by December 31st.

TSLA market cap increased from $70 billion to $631.29 billion in just 12 months – a rise of roughly 700 percent. 

The increases continued into 2021, with Tesla share price reaching nearly $900 per share before settling back down to high $700 territory.

Will Tesla stock pull off a repeat of 2020 in the coming year, or will it drop to 2019 prices?

Elon Musk View on Tesla Valuation

When Elon Musk learned that he was the richest man in the world, he had just six words for curious reporters: “How strange. Well, back to work.”

Clearly, Musk is acutely aware that his company’s recent success doesn’t guarantee future prosperity, and he is laser-focused on ensuring that the company’s gains remain intact – and continue to grow. 

During Tesla’s late-January quarterly earnings call, Musk was firm in his position that the company is worth every penny of its current valuation.

He has plans for a fleet of self-driving robotaxis, and he is confident that once launched, they will take Tesla over the coveted $1 trillion valuation threshold.

Musk pointed out that revenues from such vehicles would be almost pure profit, as the only cost for developing them is related to software. 

In short, Musk indicated no concerns about his company’s current valuation, and he expressed certainty that Tesla will continue to grow in coming months and years. Some analysts agree, projecting revenues of $45.5 billion for 2021. 

Catherine Wood Tesla Stock Prediction

Cattherine “Cathie” Wood, CEO of ARK Investment Management, might be the Warren Buffett of the digital age.

In 2018, colleagues laughed when she predicted that Tesla would hit $4,000 per share within four years. As it turned out, she aimed too low, not too high. 

When Tesla’s August 2020 5-for-1 stock split is taken into consideration, Wood’s $4,000 per share forecast was realized on January 7, 2021. That’s a full two years before anyone – herself included – thought possible.

She has since predicted that Tesla stock will hit go up another 72 percent by 2024, and many investors are listening. 

Wood expects the cost of electric vehicles to go down and demand to go up over the next few years. She, too, believes that the potential profits from robotaxies could turn Tesla into the most valuable company in the world. 

Is Tesla Stock Overvalued?

Tesla stock is the right choice for bold investors who are willing to risk it all on technological innovation. For now, the company’s valuation is based on what it might do – not what it has done already.

If Tesla succeeds in its ambitious goals, the current valuation likely doesn’t scratch the surface of the company’s potential. 

The problem is that there is no room for error – and if something goes wrong, Tesla share prices will crash.

Unfortunately, when it comes to cars, lots of things can go wrong – and when you add in new technology, that likelihood goes up. 

In short, Tesla is overvalued. It trades at a premium that isn’t supported by performance. Nonetheless, Elon Musk inspires faith, and many believe him when he says that earnings are coming – it’s only a matter of time.

Will Tesla Stock Rise?

As with any investment, there is no way to know for sure whether Tesla stock will rise. Current predictions vary based on who you ask. Financial news sources report that there is a significant range in Tesla 12-month stock price forecasts from analysts who have examined the company inside and out. 

The median is $545 per share, the lowest is $67 per share, and the highest is $1,036 per share. Overall, that indicates that a majority of the group expects to see share prices drop – but a few outliers are betting on Musk’s creativity and innovation to grow Tesla even more in the coming year. 

So, back to the big question: Is it too late to buy Tesla stock? Most analysts say yes. And yet, there is a persuasive minority that say buy now – prices will never be this low again.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.