Millionaires, Billionaires and now Teslanaires

13 Jan 2021by Aditya Anand Bapat

Millionaires, Billionaires and now Teslanaires

We’ve all heard of millionaires and billionaires, but one term that recently caught our attention was “Teslanaires”. No prizes for guessing that it’s related to Tesla, the mighty EV company. If you have even an iota of interest in cars or technology, then I’m sure you’ve heard of Tesla. Indeed, you’ve also heard of its enigmatic founder Mr. Elon Musk, who routinely creates ripples through tweets, press conferences and media appearances.

Elon Musk – The tech genius who dons many hats

It’s an adage that you have to think “out of the box” to succeed in business. Well then, what do you call someone who thinks “out of the cosmos”, quite literally! You call him Elon Musk. His companies encompass a broad spectrum of technology areas such as space tourism, telecommunications, electric cars, tunnelling, magnetic levitation, AI/machine learning, models for brain-machine interactions, etc. The list is vast and to put it in Lewis Carroll’s words, it gets “Curiouser and Curiouser”. Musk, no doubt, courts controversy at times owing to his fiery nature. But there is no denying that the guy is a genius and has created business cases out of concepts that only existed in science fiction until recently.

A look at the myriad of businesses under Musk’s control

Source: http://www.rapidshift.net/nope-cobalts-not-a-problem-the-ev-revolution-will-march-on

TESLA – A swift multibagger

While all of his companies are compelling business cases, the most famous one is undoubtedly Tesla. According to Wikipedia, "Tesla, Inc. (formerly Tesla Motors, Inc.) is an American electric vehicle and clean energy company based in Palo Alto, California. Tesla's current products include electric cars, battery energy storage from home to grid-scale, solar panels and solar roof tiles, as well as other related products and services." The stock of Tesla has been one of the biggest wealth creators in recent times. The stock has returned a staggering 794% over the past year. As of the last count, the stock price rose from $98 a year ago to $880 per share. The stock has created humungous wealth for investors who stuck to its growth story over the years.

Tesla stock returns over different time periods

Period

1M

3M

6M

1Yr

3Yr

5Yr

10Yr

Stock Return

35%

107%

168%

794%

136%

82%

66%

Source:- Investing.com. Please note 1M, 3M and 6M and 1Yr returns are absolute. 3Yr, 5Yr and 10Yr are CAGR

Simply hype or more: What caused the rise?

Tesla is currently the world’s most valuable car company. As the above graphic shows, its Market Capitalization is higher than that of some of the world’s largest car companies globally. Let us examine some reasons for the stratospheric rise in Tesla’s stock price in CY2020:

  • Growing adoption of electric vehicles, solar energy and other cleaner technologies.
  • Entry into fast growing compact SUV market (through Model Y) in early 2020. This model was cheaper than earlier SUV models of Tesla.
  • Emission credit sales worth $1.2bn in 9MCY2020 (these are directly absorbed as profits) due to its clean energy businesses.
  • Greater strides in self-driven car technology over the years, helping it command greater pricing for the technology.
  • Slated target of battery cost reduction to the extent of 56% per kWh over the longer term. As per Forbes, batteries constitute 15% of the cost of a Tesla vehicle.
  • The company also has plans to produce own batteries and mine lithium on its own, reducing costs further.
  • Tesla was included in the S&P 500 index on 21st December, 2020. This will expose the stock to a much wider ambit of portfolios and funds; increasing liquidity and investor participation.
  • In August, 2020 the company went in for five-for-one stock split which boosted investor participation (retail and institutional) as the stock became cheaper to own (on an absolute basis).
  • Given the meteoric rise in stock price, there is widespread speculation that there could be one more split in 2021, keeping sentiment buoyant.
  • Tesla’s profitability has seen a huge improvement over past four quarters, bolstered by a combination of steady revenue growth and improving profitability.

 

Patience maketh a Teslanaire

The wealth creation journey of Tesla has been marked by periods of volatility, negative news flows, stock price drop, and many other events that routinely distract investors' attention from a company's core growth story. However, investors who firmly believed in the growth story and stuck to the stock have been rewarded handsomely. To illustrate, $1,000 invested in Tesla shares in 2010 (when the company got listed) would have become $1,59,000 now! Had you invested the same amount three years ago, you would have made $20,000! As a result of this stellar stock price run, Tesla has created several millionaires out of ordinary people. And these are the Teslanaires that were talking of.

Opportunities such as Tesla are found once in a decade. You need to spot them at a reasonable time, hold on to them and ignore distractions if any. We understand that it is difficult for an ordinary individual to spot such opportunities. And this is where Research and Ranking can step in and make the journey more uncomplicated for you. We might not facilitate investing in Tesla for you, as we are focused only on Indian stocks (at least currently). However, we are continuously looking at spotting the next Balkrishna Industries or the following Page Industries. So come aboard and join us in this wealth creation process!!

 

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