Tesla Inc’s (NASDAQ:TSLA) incredible run to the upside – reporting nearly a 400% gain just this year – has left many a fundamental investor baffled.
Last month, Tesla reported its 4th straight quarter of profits which qualifies the company to join the S&P 500 Index (INDEXSP:.INX). This inclusion will only fuel further investment from traders worldwide. The 5-for-1 stock split also seems to have spurred on traders to get involved, even if the underlying value and fundamentals behind the stock price remain unchanged.
Why are investors happy to buy Tesla for what seems to be a very large premium?
Tesla is a forward looking company and investors are paying for innovation and growth. Tesla, like Steve Jobs and Apple Inc. (NASDAQ:AAPL) have done before them, are changing the way the world consumes products. Not only are Elon Musk and co. disrupting the way people drive cars, but they are also an alternative energy play. If you track the SOLAR ETF (NYSEARCA:TAN), it is up more than 66% year to date and one of the top performing sectors.
You can also make an argument that because interest rates are low, there is little else for investors to get involved with. (except possibly gold – like small-time traders such as Warren Buffett 😉)
Watch the full interview to find out if we think Tesla is still worth investing in and where we see the stock price trending in the future.
Written by James West.
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