Smart people on Wall Street are now looking at Tesla and trying to decide what to do. It may be fairly valued, or there might be a once-in-a-generation buying opportunity. If you could get in your time machine, the one you got for Christmas, and go back to April 1997, Steve Jobs had just returned to Apple. Shares of Apple were worth 14 cents apiece, because that is what 25 years of stock splits have made the price, since we are in the time machine. You know, with the benefit of hindsight, that Apple is going to be worth a lot more than 14 cents, so you buy 100,000 shares on the spot, for $14,000. If you had more money, you would buy a lot more, but all you have is $14,000.
In 25 years, those 100,000 shares will be worth nearly $13 million. On my calculator, that is a gazillion-percent return.
Now, big investors have a lot more than $14,000. If Warren Buffett could get in that time machine, he could have bought 10 million shares of Apple for $1.4 million, and they would be worth about $1.3 billion today. Buffett was not a fan of tech stocks so he didn’t get into Apple until later.
Anyway, Tesla is now at $120, down from $402 a year ago, after 12 months of some of the most stupendous value destruction in history, more thn $800 billion up in smoke. So the question is whether the market is just as wrong on the downside as it seems to have been on the upside. Steve Jobs was just as crucial to Apple’s valuation as Elon Musk is to Tesla, and when he returned to Apple after a 12-year exile in 1997, investors kind of shrugged. The markets didn’t say, oh, now Apple is on its way to becoming a $2 trillion market cap company. In fact, Michael Dell said at the time that if he were CEO of Apple “I’d shut it down and give the money back to the shareholders,” a quote he now says was misconstrued, but I don’t know what there is to misconstrue.
Now, the obvious difference between Apple in 1997 and Tesla today is that no one knew in ’97 that Jobs was going to invent one of the most significant consumer products in history, the iPhone. We pretty much know what Tesla is going to be making 10 years from now, which is electric cars and trucks. I don’t think Musk is going to come out with a Mr. Fusion home power plant in the next decade. But electric vehicles are going to transform our economy by 2040, and Tesla will be in the middle of it, and that’s what Wall Street is pondering at $120 a share.