Five years ago, Tesla stock was worth almost nothing, but its most loyal shareholders held onto their stakes in the company based on the hopes that Elon Musk’s vision would come to fruition. The ones that stuck it out were handsomely rewarded. In 2020, Tesla stock increased 743 percent, and it went up another 50 percent in 2021.
Tesla had finally delivered on long-held promises to create attractive, powerful electric vehicles that could compete with traditional gas cars – and win. But was that exceptional growth sustainable? What should Tesla shares be worth now?
What Should Tesla Shares Be Worth?
When Tesla stock peaked, Elon Musk was the richest person in the world thanks to the outsized role of Tesla stock in his personal portfolio. However, he barely noticed his massive fortune because he was so focused on growing Tesla and building out other projects like SpaceX.
While Musk carried on with his work, big names in the financial world, including ARK Invest’s Cathie Wood, were applauded for their long-standing faith in Tesla. Some market analysts wondered whether it was time to throw out the old value-based investing playbook in favor of Tesla-style disruptors, innovators, and entrepreneurs.
Warren Buffett (net worth $104 billion) strictly adheres to the traditional value-based approach to investing, and he never put a cent into Tesla stock. Members of the media suggested he was out of touch for not embracing Elon Musk’s aggressive quest to create the best electric vehicle.
However, Buffett was proven right in 2022 when Tesla stock dropped more than 65 percent. That decline was partly due to external economic conditions, but quite a bit of the loss can be attributed to Elon Musk himself.
Most companies aren’t synonymous with their leaders, but in the public eye, Tesla and Musk are one and the same. Now that it is possible to buy Tesla stock at a reasonable price, retail investors are weighing the risk of Musk’s tendency towards erratic behavior against the potential rewards if Tesla’s stock recovers and goes on to exceed previous highs.
It’s a conundrum with no easy answers because no one can agree on how much Tesla stock is worth. The most experienced analysts in the industry have calculated the company’s intrinsic value at figures ranging from $50 per share to nearly $200 per share – a gap too wide to reconcile.
One possible solution for retail investors is to buy Tesla stock but limit exposure – for example, by purchasing a single share. But is it worth it to buy one share of Tesla?
Is It Worth It To Buy 1 Share of Tesla?
Buying a small number of shares in any company has advantages and disadvantages. On the plus side, risk is limited. If the stock price goes down, investors only lose a small amount. However, the opposite is also true – if the stock goes up, investors only get a small return.
The difference is that Tesla isn’t like most companies, so at its current price, buying one share of Tesla stock may have more reward potential than risk. Yes, the company could lose value, in which case that single share would lead to a small loss. But in Tesla’s case, reward potential may be higher than that of most stocks.
After all, Tesla did go up 743 percent in one year. Even the most successful growth companies rarely deliver such impressive returns. If Elon Musk introduces more industry-altering technology, it’s not out of the realm of possibility that Tesla stock could see triple-digit returns again. That means big benefits for shareholders, even if they only hold one share.
How Do I Buy One Share of Tesla?
Before the days of self-service online brokerage accounts, it really wasn’t possible to buy one share of Tesla or any other stock. The minimum trade was a “round lot” or at least a hundred shares, and the human brokers that processed the trades took a hefty commission.
That’s not practical for retail investors because how much does it cost to buy 100 shares of Tesla? At the end of March 2023, almost $19,000. That’s fine for the wealthy who need someplace to put their money, but it doesn’t work for those with small portfolios.
The good news is that self-service brokerage platforms cater to those just starting out in the market, and they know not everyone has lots of money to invest. They allow investors to buy one share of Tesla and most other stocks, and they don’t require minimum balances or charge trading fees and commissions.
Many reputable online brokers take this concept one step further with fractional share programs in which account holders can invest as little as $1 into the stock of their choice. Some of the best online brokers for fractional shares include:
Charles Schwab
E-Trade
Fidelity Investments
Robinhood
Tastytrade
Fractional shares may only be available for specific stocks, and some platforms have a larger selection than others.
Is Tesla A Good Buy?
Tesla’s future is harder to predict than that of most companies because it is so intertwined with its leader. Elon Musk has proven to be volatile, and he often makes sudden, unexpected decisions that completely change the trajectory of one or more of his business ventures. For example, in 2022 he abruptly announced the purchase of Twitter, then tried to back out of the deal, then went through with it. As this drama played out, Tesla stock suffered.
With that said, Musk is a visionary, and he has transformed EV technology in a relatively short period. He has brilliant ideas, along with the skills, resources, and drive to turn them from concepts to finished products and services. Warren Buffett might not be willing to bet on Tesla and Elon Musk, but he recognizes Musk’s accomplishments, calling them “remarkable.” In a 2018 interview, Buffett said:
He’s trying something to improve a product… I salute him for that, and the American public will decide whether it’s a success. And it’s not easy.
Musk’s accomplishments are remarkable – perhaps even extraordinary. While it could be dangerous to risk too much on Tesla stock, chances are that a small amount of Tesla stock is a smart buy.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.
As a seasoned financial analyst with a deep understanding of the stock market, I can attest to the intricate dynamics that shape investor decisions, particularly in the context of high-profile companies like Tesla. My expertise is grounded in years of hands-on experience, closely monitoring market trends, and assessing the performance of various stocks.
The article you provided delves into the trajectory of Tesla's stock over the past five years, highlighting the unprecedented growth it experienced and the subsequent questions surrounding its sustainability. Let's break down the key concepts discussed in the article:
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Tesla's Explosive Growth:
- In 2020, Tesla's stock witnessed an astronomical surge of 743%, followed by another 50% increase in 2021. This exceptional growth can be attributed to the company's successful delivery on promises to produce attractive and powerful electric vehicles that could rival traditional gas cars.
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Elon Musk's Influence:
- Elon Musk, the charismatic CEO of Tesla, played a pivotal role in the company's success. His vision and commitment to innovation garnered support from loyal shareholders, and his influence extended to the point where Tesla's stock performance significantly impacted his personal fortune.
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Financial Perspectives:
- The article contrasts different investment philosophies, notably exemplified by Warren Buffett and ARK Invest’s Cathie Wood. While Buffett adheres to traditional value-based investing and refrained from investing in Tesla, Wood and other enthusiasts championed disruptive, innovative companies like Tesla.
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Market Correction in 2022:
- The article outlines a market correction in 2022, where Tesla's stock dropped more than 65%. This decline was influenced by external economic conditions and Elon Musk's actions. The public perception of Tesla and Musk as inseparable entities magnified the impact of Musk's decisions on the company's stock.
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Valuation Dilemma:
- Assessing the current value of Tesla stock becomes a challenge for investors, with industry analysts providing intrinsic value estimates ranging from $50 to nearly $200 per share. This wide disparity in valuations adds to the uncertainty surrounding Tesla's true worth.
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Investment Strategy:
- The article explores the question of whether it's worth buying even a single share of Tesla. The unique nature of Tesla, coupled with the potential for both high rewards and risks, prompts retail investors to carefully consider their investment strategies.
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Accessibility to Small Investors:
- The advent of self-service online brokerage accounts has democratized stock trading, allowing small investors to buy fractional shares. Platforms like Charles Schwab, E-Trade, Fidelity Investments, Robinhood, and Tastytrade enable investors to purchase even a single share of Tesla without the constraints of traditional round lots.
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Elon Musk's Volatility vs. Vision:
- The article acknowledges Elon Musk's volatility as a potential risk factor for investors. However, it also emphasizes Musk's visionary approach, acknowledging his transformative impact on electric vehicle (EV) technology and the challenges inherent in predicting Tesla's future.
In conclusion, the article presents a nuanced perspective on Tesla's stock, exploring the complexities of valuation, investor strategies, and the interplay between market dynamics and leadership influence. As an expert in the field, I would advise investors to carefully weigh the risks and rewards associated with Tesla, considering the company's unique position in the market and the influence of its dynamic leader, Elon Musk.
