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The last year was a breakout one for companies in the electric vehicle space. Since the start of 2020, shares of EV companies such as Tesla (NASDAQ: TSLA), NIO (NYSE: NIO), and GreenPower Motor have each gained 851%, 1,370%, and 1,840% respectively. Comparatively, the S&P 500 has gained just 24% in this period.
The long-term drivers for EV stocks remain intact as the shift towards clean energy is inevitable. This makes Tesla one of the top stocks to watch out for in the upcoming decade. Let’s take a look to see if the EV leader can continue to beat the broader markets in 2021 as well.
Tesla is a market leader
Tesla has been one of the top wealth creators for long-term investors. It has gained a staggering 20,600% since it went public back in July 2010. This means a $1,000 soon after Tesla’s IPO would have returned over $207,000 today.
It has been one of the top-performing stocks in the last year despite a global pandemic, a sluggish macro-economy as well as rising competition in the high-growth EV space. Tesla has been a market leader in the highly disruptive electric vehicle segment.
There is little doubt the company is changing the way consumers think about electric vehicles making Tesla a really popular company on Wall Street. In the first half of 2020, Tesla sold over 47,000 vehicles in the U.S. taking the top three spots with its Model 3, Model Y, and Model X. The next spot was held by Chevrolet Bolt that sold 8,400 units.
It is now successfully gaining traction in the global EV market as well. It delivered 499,550 vehicles in 2020 all around the world, an increase of 36% year over year. Tesla now accounts for 18% of the global EV market and 80% of the market in the U.S.
Focus on innovation drives stock price
Tesla has several other vehicles in the pipeline that includes the Cybertruck which means it continues to focus on the expansion of its product portfolio as well as spend heavily on research and development. This will help the EV giant maintain its leadership position and fight-off competition.
Investors are not just impressed with Tesla’s vehicle sales. In fact, the company has consistently managed to crush Wall Street expectations. Tesla does not always beat consensus revenue and earnings estimates each quarter. However, it's stock price growth continues to confound analysts.
In 2018, ARK analyst Cathie Wood said Tesla stock would reach $4,000 within five years which meant there was an upside potential of 1,200%. Not only did Tesla reach that figure (on a split-adjusted basis), it did so two years earlier than expected.
Tesla bears are having a hard time explaining the stock’s exponential returns. Noted short-seller Jim Chanos who bet against the EV stock in the past, recently admitted that it is impossible to short Tesla shares.
What next for Tesla investors?
Similar to other growth companies, owning Tesla shares also carries certain risks. The threat of rising competition may threaten the company’s leadership position. However, bears were of the opinion that competition from larger automakers would destroy Tesla while bulls believe it will keep grabbing market share from incumbents.
Tesla was an underdog when it entered the automotive market and has beaten all odds to be valued at close to a trillion dollars in terms of market cap.
One reason why investors should remain bullish on Tesla stock is due to Elon Musk’s 20% ownership in the company. Musk is a visionary CEO and while he is sometimes controversial, investors are drawn towards his optimism and ability to generate path-breaking ideas and execute them.
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