Tesla (TSLA) has been one of the top performers in 2020. It has in fact crushed market returns since going public back in July 2010. Tesla stock has returned a staggering 10,800% in just over a decade which means a $1,000 investment soon after its IPO would have ballooned to $108,000 today…
The company has managed to surpass expectations amid a global pandemic and investors remain bullish about the transition towards electric vehicles in the upcoming decade. This means prices for EVs will significantly reduce and Tesla’s automobiles will be affordable in emerging markets as well. Tesla is already leading the U.S. EV market with a share of 80%.
The long-term growth drivers for Tesla are secular but investors will also have to account for rising competition in an industry that is still at a nascent stage and poised for exponential growth.
In the third quarter of 2020, Tesla sales were up 39% year-over-year at $8.8 billion while net income soared 131% to $331 million. Its earnings per share more than doubled to $0.76 while operating cash flow grew by a stellar 217% to $2.4 billion.
Tesla crushed Wall Street estimates in a recessionary environment and the September quarter was the best one in the company’s history.
Is Tesla’s valuation a concern?
Due to the stellar rise in stock prices, Tesla is now valued at a market cap of $408 billion. This means the stock is trading at a forward price to sales multiple of 13.2x which is sky-high. But the EV giant has time and again surpassed consensus estimates and pleasantly surprised investors.
The company is forecast to grow sales by 25.6% to $30.9 billion in 2020. This growth is expected to accelerate to 44.7% in 2021. Tesla’s price to earnings multiple is close to 190 but analysts expect earnings to grow at an annual rate of 350% in the next five years.
We can see why Tesla remains an investor favorite despite its lofty valuations. However, there is another EV stock that might outperform Tesla over the long-term. This is a…
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