Tesla's performance over the past 12 months comes up short of the overall market's gain.
The stock's current valuation shows just how bullish market sentiment has become, with Tesla having no room for error.
By disrupting the massive global automobile industry, Tesla (NASDAQ: TSLA) became one of the best performing stocks on the market. Shares have rocketed higher over the past decade. And they currently trade at record levels.
More recently, though, shareholders have dealt with a different reality. If you had invested $1,000 in Tesla shares one year ago, here's how much you'd have today.
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Image source: Tesla.
Tesla proves that even the most valuable companies can experience heightened levels of volatility. During the three months leading up to mid-March this year, the stock had dropped 49%. Shares have more than doubled over the following nine months, as market sentiment improved drastically.
All told, this electric vehicle (EV) stock is up 9% over the past 12 months (as of Dec. 16). A $1,000 starting investment would be worth $1,090 today. That's not impressive.
Despite underperforming the market in the last year, Tesla shares trade at a nosebleed valuation. The current price-to-earnings ratio of 318 shows just how bullish investors have become about the company's autonomous driving and humanoid robotics efforts. Progress is being made, but there is still a lot of long-term uncertainty around tech development and customer adoption.
Tesla needs to execute flawlessly to live up to the valuation. Any missteps could send the stock tanking in no time.
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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.