Tesla’s share price up 10% off the back of the new potential initiatives.
👉 Background: Tesla shot onto the electric vehicle scene back in 2008 with its first car, the Roadster. Since then, other vehicle companies rode the bandwagon and started offering cheaper EVs.
👉 What happened: As a result, Tesla has been forced to drop its car prices 3 separate times in April and May to clear a backlog of stock. Even so, it has still seen its sales decline in the most recent quarter by 4.8% - less than the 8.5% fall in the first quarter.
👉 What else: But Elon Musk was back to his best, hyping up new initiatives within Tesla that are not the electric vehicles.
Next minute: Tesla’s share price up 10% off the back of the new potential.
💡In emerging technologies, valuations can seem sky-high, but there's often a reason behind the hype.
💡Investors often pay a premium for the potential of future profits, rather than current performance. For example, Guzman y Gomez’s current price to earnings ratio (or PE ratio) is over 500 because of its promises for the future.
💡Back in 2020, Tesla’s PE ratio was over 1,100, but since then, its PE ratio dropped to under 35 because Tesla’s electric vehicles aren’t that unique or appealing anymore. But now, its ventures into AI and energy storage present opportunities that could redefine sectors. And investors' anticipation of growth in these sectors boosted its share price by 10%.
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