Stocks globally are falling and the bottom may still be a long way but if you had to choose one stock that you would invest in today and trust your instincts that it will perform well over the next few years, which one would it be?
Ok, we at Chump Profit are biased, we love Elon Musk, why, because people invest in inspirational thinkers and innovators and he is number one at the moment.
We all have had a dabble with Crypto's and to be honest who knows where they are heading , however, investing in a real technical company which is the market leader and has the market share must be a good idea.
Look how Microsoft has performed over the decades, look at Apple and Amazon, market leaders who's stocks have risen over the years and will shrug off, short term market corrections.
So why not invest in Tesla now the price has fallen? Remember times goes fast.
A $1,000 investment in Apple on the day of its IPO on December 12, 1980, would be worth more than $425,000 today, according to CNBC calculations. However, a $1,000 investment in Microsoft on the day of its IPO on March 13, 1986, would be worth more than $1.7 million, or around four times more.
Looking for the Next Tesla? There Won't Be One.
At least not in electric vehicles.
Tesla (TSLA -6.42%) has taken the market by storm in just a few short years. The electric-vehicle (EV) stock is up nearly 2,000% in the last few years as the company went from a cash-burning niche player to the leader in the biggest transition in automobiles in a century.
EVs are going mainstream, and Tesla is the reason why, but the stock isn't just up on hype. The automaker has delivered both strong revenue growth and profitability. In Tesla's first quarter, revenue jumped 81% to $18.8 billion, and operating income rose more than six times to $3.6 billion. Operating margin ramped up to 19.2%, well ahead of any other major automaker.
Tesla's success has sparked a boom in electric-vehicle stocks, including traditional automakers like GM and Ford, which are pivoting to EVs. In fact, there's no shortage of EV start-ups that have been dubbed the "next Tesla," including Rivian (RIVN -2.33%), Lucid (LCID -4.57%), Nikola (NKLA -3.11%), Nio, BYD and Polestar, which is soon to go public through a SPAC merger with Gores Guggenheim.
While there will almost certainly be other successful electric-vehicle companies, there won't be another EV stock with eye-popping returns like Tesla. Here's why.
Tesla is the disruptor
Tesla went from a market cap of around $50 billion to north of $1 trillion in just about two years because it successfully disrupted a massive industry. The company is nearly 20 years old now and has been public since 2010, but it wasn't until 2020 that it reached a tipping point where profitability was assured and the market was convinced that electric vehicles were the future of the automobile industry.
Tesla stock was able to gain 2,000% in a short period of time because the market gave long odds to its success. In fact, in 2018 and 2019, many of the headlines on Tesla focused on its cash burn rate and its chances of going bankrupt. Today, it's a much different story, and the unlikeliness if its success, at least in the market's eyes, is as much of a reason for the stock's monster returns as is the success of the business itself. Though hype played a role in the stock's jump, at this point the valuation is well-supported by the fundamentals as the stock is trading at a forward P/E of 60 with an expected 60% revenue growth this year.
But now that Tesla has disrupted the auto industry, it can't be disrupted again, or at least not in the same way. Rivals like Rivian, Lucid and the other Tesla wannabes don't have anything to disrupt electric vehicles because they're already going mainstream. All they have to do is follow the path that Tesla has paved for them and enjoy the sky-high EV valuations that Tesla's success has created for the industry. While there's room for improvement in any product, the magic moment of proof-of-concept in EV's has already happened, thanks to Tesla, and that can't be repeated.
There's a reason why many of the most successful stocks of the 21st century were disruptors. These are stocks like Amazon in e-commerce and cloud computing, Netflix in video entertainment, and Apple in telephony. It's very hard to disrupt an entrenched industry, and the market is generally sceptical of would-be disruptors until they've proven themselves. Like Tesla, Amazon and Netflix were unprofitable for much of their histories, which increased the market's odds against them, helping them deliver huge returns in the long run.
Going from a start-up to successfully disrupting a massive industry will usually result in fantastic returns, but the market is also sceptical of disruptors because most of them fail.
The Tesla effect
As stocks, one of the most important differences between Tesla and its EV challengers is its valuation. Tesla's success distorted the market for EV stocks, and there's an enormous gap between challengers like Rivian and Lucid, compared to Tesla when it had a similar market cap.
For instance, Tesla finished 2018 at a market cap of $57 billion. It had $21 billion in revenue and delivered 245,000 vehicles that year. Though it lost money for the year, it made a $414 million operating profit in the fourth quarter.
By comparison, Rivian's market cap briefly topped $150 billion shortly after its Initial Public Offering (IPO) last November, even though it had only begun selling vehicles two months earlier. Similarly, Nikola's market cap was $30 billion at one point without having sold a vehicle, and Lucid flirted with a $100 billion market value late last year, even though it only began selling cars last fall.