Tesla (TSLA) has had a stonking year. Its share price has soared an incredible 800%. It’s no wonder, after such a stellar run, that many investors have started wondering: how long can this continue?
The question seems very reasonable: Morningstar analysts assign the Nasdaq-listed electric car company a Very High Uncertainty rating and a rating of just one star (out of five), indicating that shares are trading significantly above their Fair Value. Morningstar analyst, David Whiston assigns the stock a fair value of $195 – less than half the current $420 a share at whic they are trading.
But despite all that, there are at least four managers who have a high conviction in Tesla’s long-term growth potential. We’ve looked at funds with a Morningstar rating and with a portfolio weight of at least 2% in Tesla. The following list came up:
|Scottish Mortgage Inv Trust|
|Baillie Gifford Global Discovery|
|Franklin US Opportunities Fund|
|JPMorgan American IT|
The Scottish Mortgage Investment Trust (SMT), which has been recently downgraded from Gold to Silver by Morningstar analysts, stands out among the group. The £14 billion investment trust is known for its focus on companies disrupting their industries, and has been a long-time backer of Tesla. James Anderson, manager of the trust, reduced his stake in Tesla from more than 12% of the the portfolio to below 5% at the end of August. Regulations state that investment trusts can have a maximum of 15% of their assets in any one stock and Tesla’s share price surge had pushed up its weighting in the trust considerably.
However, Anderson remains a strong supporter of the electric car maker and intends to be a significant shareholder for many years ahead. “We remain very optimistic about the future of the company,” he says. “Tesla no longer faces any difficulty in raising capital at scale from outside sources but should there be serious setbacks in the share price we would welcome the opportunity to once again increase our shareholding.”
He also praises the extraordinary efforts and achievements of Tesla in driving forward a transportation and energy revolution. “Without Tesla’s efforts the possibility of averting climate disaster would have been significantly reduced,” says Anderson.
Timothy Parton, manager of the Bronze-Rated JPMorgan American Investment Trust (JAM), is another manager who sees a promising future for Tesla. He believes the business is not only the “best-in-class” leader in electric vehicles, with an 80% market share, but also has a huge competitive advantage in software development including battery technology and semiconductor sensors.
“We believe Tesla will maintain a meaningful share of growth in this space over the next 10 to 20 years,” he says. “If you remain unconvinced about the opportunity for Tesla, and continue to view it as a car company, think back to Amazon in the early stages when the market tried to rationalise it as a plain vanilla bookseller.”
All in all, different opinions should be expected on such a controversial stock as Tesla. Morningstar columnist John Rekenthaler , however, suggests the company should eventually be able to justify its $400 billion market cap, which is more than double that of Toyota.