Tesla (NASDAQ: TSLA) stock is one of the most popular and widely traded shares in the US, UK and elsewhere. But investing in Elon Musk’s electric-vehicle maker is like riding the world’s roughest roller coaster. Indeed, Tesla investors need strong stomachs to ride out this stock’s crazy volatility.
Tesla stock soars and roars
Since late 2019, Tesla stock has been on a massive, explosive upward surge. At the end of 2019, the shares closed at $83.67. But during the Covid-19 crisis of 2020-21, Tesla became a leading meme stock — and buying pressure caused by millions of fans sent its shares skyward like a SpaceX rocket.
On 31 December 2020, Tesla stock broke $700 for the first time, hitting an intra-day high of $718.72 before ending the year at $705.67. It then soared again last year, hitting an all-time intra-day high of $1,243.49 on 4 November.
Tesla falls back to earth
On 4 April 2022, Tesla stock was again riding high, closing at $1,145.45. But it’s been pretty much all downhill since CEO Elon Musk made his bid to buy Twitter. On 24 May, it closed at $628.16, down more than $615 from its November record high. Here’s how this white-knuckle share has performed over seven different timescales.
| One day | -9.2% |
| Five days | -2.7% |
| One month | -26.2% |
| Year to date | -33.4% |
| Six months | -30.3% |
| One year | 17.4% |
| Five years | 884.5% |
As you can see, Tesla stock is down a third in 2022, yet is still worth almost 10 times what it was five years ago. But note Friday’s big fall (-9.2%), when Elon Musk broke grim news to his employees.
Three shocks for Tesla
In two internal emails circulated to Tesla executives and staff on Thursday and Friday, Elon Musk warned employees of three possible shocks. First, Musk said he had a “super bad feeling” about the economy — echoing growing fears of the risk of a US slowdown or full-blown recession. Second, the world’s richest person told executives that Tesla would cut 10% of its salaried staff, while freezing hiring. Third, Musk insisted that salaried workers be in the office at least 40 hours a week “or find a different job”. In response to these warnings, Tesla stock slumped by $71.45 to close at $703.55 on Friday.
After Friday’s steep fall, where does this leave the stock? Tesla is valued at nearly $729bn, making it a mega-cap super-heavyweight. But based on their trailing price-to-earnings ratio of 95.1, the shares offer an earnings yield of a tiny 1.05% and no dividend yield.
To me, these fundamentals suggest that the stock is still completely detached from the group’s underlying business prospects. After all, Tesla is the world’s most valuable carmaker by miles, yet made only one in 70 (1.4%) of all cars sold worldwide in 2021. Thus, I regard TSLA as far too risky, volatile and over-priced for me and would not buy this stock today. Of course, I could be wrong and this growth stock may surge explosively once more. But I think its best days as an investment are over.