2. Tesla, Inc. (NASDAQ: TSLA)
P/E Ratio: 372
Tesla, Inc, simply known as Tesla, is well known globally for two reasons. The first is the fact that it is the first American auto manufacturer which has managed to not only develop a mass production system, and the second is its chief executive officer Mr. Elon Musk, who is known for his pledged drive to change the future by making electric vehicle ubiquitous and making life interplanetary through his second company, Space Exploration Technologies, Corp (SpaceX).
Tesla is also known for struggling to smooth out its manufacturing processes, and 2020 has been the first year that saw few problems for the company on this front. However, even as the company sets up a strong base in China and regularly pushes out vehicles, its true growth potential lies in a future where Musk wants a cheap electric vehicle affordable to the bulk of the global population.
These aspirations have fueled Tesla’s price to new highs. Tesla’s shares closed at $62.27 in 2017 and its closing price on Thursday, August 26 2021, was $701, making for eye-popping 1026% growth in just three years. And while the share price soars to new highs, investors are happy as they’ve rewarded Tesla with a P/E ratio of 372.
In the Q2 2021 investor letter of Worm Capital, the fund mentioned Tesla, Inc. (NASDAQ: TSLA). Here is what the fund said:
“Tesla underperformed in the quarter, but we maintain our high conviction in the long-term thesis on each business model. Much like art or writing, investment research is a continuous process—it never really ends. Prices can move in either direction in any given quarter, but our advantage often comes from knowing the businesses so well that short-term fluctuations in pricing shouldn’t affect our decision-making. On high conviction positions, this patience is often rewarded, which is why research is so valuable to our process…
..Tesla is in a class of its own. What many in the market seem to (still) not understand is that Tesla is not a car company so much as a complex manufacturing firm—with significant recurring software potential—growing, in our view, at a targeted rate of 50-100% YoY over the next several years. Unlike any other automotive firm in existence today, Tesla alone is a vertically integrated hardware and software business developing state-of-the-art manufacturing techniques that will revolutionize the auto industry (i.e. its Giga Presses, 4680 cells, etc.). It is a generational company and we anticipate it will eventually be the largest company in the world. Many of the conventional narratives around competition displacing Tesla’s lead are fundamentally flawed, and the many headlines surrounding Tesla’s approach to autonomy are frustratingly superficial. (As an aside, we highly recommend watching Andrej Karpathy’s, Tesla’s head of AI, his recent presentation from June: “Tesla details its self-driving Supercomputer that will bring in the Dojo era”)”
