With a market capitalization of $834.18 billion, Tesla (TSLA) is the largest automobile company in the world and is the fifth-most valuable company on the S&P 500 index. Wall Street skeptics have raised their price targets and ratings by double or triple due to the 814% increase in Tesla shares over the past year, despite market expectations at the time of close of trade being well beneath $880.
Past 10 Year’s Performance
Tesla’s stock has soared upwards of 18,318% in the ten years after the company’s IPO on June 29, 2010. An investment of $10,000 in 2010 would now be worth more than $1.8 million, which means investors have seen returns of more than 63% per year. Comparatively, $10,000 invested in the same investment portfolio represented by the S&P 500 index at the same time would have grown by only 267% to $36,732, leaving it with an annual growth rate of only 13%.
What is Tesla’s fate in 2021?
However, Tesla (TSLA) proved that it can become profitable in 2020, even though their company has lost money every year since their founding in 2003 before they reached production of half a million electric vehicles a year.
There is a general perception among investors that despite some incredible growth, many analysts warn about the downside risk for Tesla shares in 2021. To some, the recent gains are expected to lose steam and have long been described as a “bubble”.
Second, Tesla’s growth rate of production is expected to slow in 2021 as the production capabilities at its Fremont and Shanghai plants are reaching their apex.
Third, The largest part of Tesla’s capital expenditures this year will be attributed to two plants being built. One is located in Germany, while another is located in Texas. Elon Musk warns, however, that these plants will succeed at large-scale production more slowly than the factory in Shanghai did.
According to RBC Capital Markets analyst Joseph Spack, who upgraded Tesla (TSLA) shares from “sell” to “hold” and lifted the price target to $700, Tesla was able to raise capital so cheaply by selling shares in 2020, rather than relying on its own cash funds. From the sale of additional shares in 2020, Tesla raised about $12 billion.
It is unclear, however, how Tesla (TSLA) will make good on its investment in 2021 with this stock growth. Furthermore, Tesla may find itself in a situation where its shares plummet, forcing it to look for expensive lending. Tesla’s stock continues to grow in the opinion of some despite its real market shares of less than one percent in the global automotive market and the recent growth in global competition. Tesla (TSLA) faces high expectations from investors, and it will be hard for the company to meet them this year.