Could Tesla Inc. (NASDAQ: TSLA) follow AOL’s footstep, the famed media King that imploded immediately after being added to the S&P 500? That’s the million-dollar question sending shockwaves in the aftermath of the electric vehicle giant meteoric rise to record highs in one of the most challenging macro-environment.
Tesla Warning
Wells Fargo Securities’, Chris Harvey believes 2021 will be a defining moment for the electric vehicle giant that continues to send shockwaves in the auto industry. Tesla has risen up the ranks to become the most valuable auto company thanks to its revolutionary technology in the development of autonomous electric cars.
For how long the company will continue to call the shots is still a bone of contention. At its peak, AOL had a game-changing technology and competitive edge in the media industry. Immediately after being added to the S&P 500, the company struggled to keep up with the industry's rapid pace of technology.
Competition Factor
There is growing concern that the same fate could befall Tesla. The EV giant has risen by more than 700% this year, which, according to Harvey, is sufficient evidence not to think about growth. Tesla's meteoric rise has mostly come at the back of minimal competition in the EV space.
Competition in the development of electric vehicles is expected to inch a notch higher in 2021. A good number of companies are ramping up investments in the development of affordable EV cars to take on the EV leader.
Stiff competition could come from other tech giants, also eyeing opportunities in the nascent sector. Apple is one of the tech heavyweight believed to be working on EV self-driving cars that should be a point of concern for Tesla.
While Tesla is up by more than 700% for the year, Harvey does not expect the stock to outperform come 2021. Investors are starting to lose interest in the growth and momentum stocks as economically sensitive areas catch a bid amid global economy bounce back from the pandemic.