Death and taxes are the only things that are certain. On the opposite end of the spectrum is the stock market — one of the most difficult, if not impossible things to predict is which direction the place where buyers and sellers converge will go. While analysts can make logical predictions based on a myriad of theories, those at the end of the day are just predictions and can go either way. That said though, there’s nothing wrong with surmising, particularly when it’s based on sound judgement and reasonable insight.
For the past few years, the world bore witness to the birth and growth of one of the most ambitiously futuristic companies ever — Elon Musk’s tech company Tesla, Inc (NASDAQ:TSLA). Although Tesla experienced a lot of ups and downs, it’s not so far-fetched to think that its strategic moves are paying off, and that its investors will be reaping the benefits. And it’s not just Musk who believes so.
One of Tesla’s most notable investors is billionaire Ron Baron whose company Baron Capital Management owns around $300 million worth of Tesla shares. Baron is well-known for his buy-and-hold attitude when it comes to stocks. That simply means he buys stocks on a long term basis. In the case of TSLA, he is planning on holding out for the next 13 years at least as he believes the ticker has nowhere to go but up.
According to Baron, they built up their ownership to 1.6 million shares over a period of 3 1/2 years, and that their average cost is around $208 per share. Speaking as a guest on CNBC’s “Squawk Box”, he said that he expects their investment to quadruple in 2020, triple in 2025, then triple again in 2030. Where is this confidence coming from? Tesla’s acquisition of SolarCity last November.
Baron believes this move (which caused skepticism among many of Tesla’s investors) makes ‘long-term sense’ because selling more electric cars necessarily means more energy needs to be produced to power those cars. Especially with the increasing clamor to switch from fossil fuel to renewable sources of energy, SolarCity being in the picture does make perfect sense as it offers the best energy solution.
He said, “Forty percent of the electricity in the United States is used by single-family houses. If you put a [Tesla] car in the garage, that car uses 30 percent of the electricity of the house. In order to sell the [electric] cars you have to … have an increase in power.”
Baron’s train of thought is remarkably similar to Musk’s own standpoint regarding Tesla’s direction. Last year, Musk boldly predicted that if a company — meaning his company Tesla, of course — is able to help the world transition to sustainable transportation (e.g. electric cars) and cleaner energy (e.g. solar power), then a capitalization worth trillions is achievable.
A reasonable deduction or just wishful thinking? We’ll know in a few years.
Tesla Stock Action
Tesla, Inc. is currently valued at $43.79 billion and has a median Street price target of $207.50 with a high target of $338.00.
In the past 52 weeks, shares of California-based auto and renewable energy player have traded between a low of $167.84 and a high of $287.39 with the 50-day MA and 200-day MA located at $248.54 and $214.53 levels, respectively. Additionally, shares of TSLA trade at a P/E ratio of (3.41) and have a Relative Strength Index (RSI) and MACD indicator of 69.24 and 11.75, respectively.
Tesla stock was last trading Monday at $272.23, up 1.22% from Friday. The name, set to report 4Q16 results after the market closes on Feb 22, currently prints a one year return of about 64%, and a year-to-date return of around 27%.