Amid a rollercoaster year for Tesla and reports of the EV maker’s former president selling off large amounts of stock, should investors buy?
As an early 90s-born Millennial, ‘The Simpsons’ played a large role in my early development. The strange yellow people of Springfield have had a whole range of guest appearances from celebrities in the show’s 30+ year history. But, perhaps none more famous than Elon Musk, who appeared in the 2015 episode, ‘The Musk Who Fell to Earth’.
The anniversary of that episode was this weekend, and with it comes an interesting figure. If you had invested $1,000 in Tesla (NASDAQ: TSLA) when Musk appeared in that episode six years ago, you’d be sitting on $15,481.90 — a gain of 1,447% with stock splits taken into account.
That figure should be in investors’ minds when thinking about the company’s performance year-to-date.
Why is Tesla’s stock price underperforming?
Labeling Tesla’s stock price as ‘underperforming’ needs to be looked at with context: the company’s stock has soared a massive 740%, with EV sales jumping to just shy of 500,000, smashing previous records.
In 2021, however, it’s a slightly different story. At the time of writing, its share price has dropped almost 15%, and that’s despite a 7% jump in the past month — so a recovery looks to be on its way.
This underperformance, in comparison to 2020, is mainly due to overall market sentiment towards growth stocks, inflation fears that are encouraging investor volatility, as well as a number of production issues for Tesla. In addition to the numerous recalls, it is also struggling to produce enough cars given the global chip shortage as well as COVID-induced delays.
Former Tesla president sells shares
Some investors have been feeling some worry after it was revealed that long-time Tesla executive and former President, Jerome Guillen, sold an estimated $274 million worth of shares after exercising stock options since June 10.
“It could raise some eyebrows for investors,” Wedbush Securities analyst Daniel Ives said, adding that investors are going to watch closely to see if he sells more.
Normally, investors should not pay too much attention to such insider trading if it is inconsistent. However, Guillen’s departure earlier this month, immediately after being made president of Tesla’s trucking unit, has sparked market concerns about Tesla’s future vehicle programs like the semi-electric trucks and its new batteries called 4680 cells.
Should investors be worried?
Tesla might not have reached its 2020 goal of selling half a million vehicles, but it was only by a whisper and it will certainly meet and exceed that number in 2021. In Q1, it sold nearly 183,000 vehicles and the company is predicting annual growth of 50% in vehicle deliveries. By 2030, the company is expecting to sell 5 million vehicles annually.
With a 17% global market share and an expected EV penetration of 40%, it’s not unreasonable to assume Tesla will meet this objective and earn $175 billion in revenue from auto sales alone.
For more information about the bull and bear cases for Tesla, read our blog here.
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