None of America’s greatest companies were built in a day, and in many cases, it has been worthwhile waiting a decade (or more) for the payoff.
Investors in the initial public offerings (IPOs) of Tesla (TSLA 0.30%) and Netflix (NFLX -1.69%) can attest to that. While the two organizations are very different, their common denominator is the positive effect they’ve had on shareholders’ fortunes.
Let’s examine exactly how much early investors have been rewarded, and explore the reasons why both stocks are still worth buying today.
1. Tesla is always thinking about the next 10 years
Tesla might be one of the most diverse bets in the technology sector. Its core business involves producing electric vehicles, and it leads the world in sales, with more than 1.3 million cars delivered in 2022. But CEO Elon Musk has set some ambitious targets for the remainder of this decade, which involve the company making 20 million cars per year in as many as 12 Gigafactories around the globe by 2030.
That would be a remarkable achievement, and considering Tesla had an annual production rate of just 20,000 vehicles a decade ago in 2012, it has already proven its ability to rapidly scale. But the opportunities for growth don’t stop there.
Tesla is a leading developer of machine learning-powered autonomous self-driving software. It plans to use this technology in a fleet of robotaxis slated for release in 2024, which opens the door to an entirely new industry for the company — one that could be worth over $2.1 trillion by the end of this decade.
Tesla also has a fast-growing residential green energy business where it provides solar and battery storage hardware. Additionally, it’s set to release its humanoid robot, Optimus, in 2027 which could change the face of the workforce forever. It will be capable of completing low-skill jobs currently occupied by human employees, which could allow factories to operate around the clock.
Tesla listed on the public markets in June 2010 priced at $17 per share. Had you invested $10,000 at that time, you’d have acquired 588 shares. But the company has completed two stock splits since then (in 2020 and 2022) to reduce its share price, keeping it accessible to smaller investors. As a result, you’d actually have 8,846 shares today with a cost basis of $1.13 per share.
Since the stock trades at $193.81 as of this writing, you’d be sitting on a whopping 17,051% return. In dollar terms, your $10,000 would be worth an eye-watering $1.7 million today! Given everything Tesla has in the pipeline, its stock certainly has the potential to head higher going forward, too.
2. Netflix changed entertainment forever, and it’s probably not done
The Netflix story is complete with all the highs and lows you’d expect when a start-up is trying to disrupt an entrenched industry. It began in 1997, when Netflix sought to change the way consumers rent movies. It used the internet to facilitate the delivery of physical DVDs to customers, which added a new level of convenience to the experience (the company added streaming in 2007).
But when the technology sector imploded in 2000, the Netflix team decided selling the company was the best way to salvage the value they’d created. They approached Blockbuster — its archrival — with a $50 million proposal, but the deal was rejected. Blockbuster would prove to regret the decision because it fell into bankruptcy in 2011, while Netflix is thriving today, with 231 million subscribers to its streaming service.
It’s the largest player in an increasingly fragmented industry — there are now more than 60 different streaming platforms hosting at least 1 million subscribers. But Netflix feels it still has plenty of growth potential because it only accounts for 10% of TV screen time in its core markets like the U.S. and the United Kingdom. Plus, it continues to tap new emerging markets like India, which has a larger population than any one Western country.
Netflix generated $4.5 billion in net income during 2022 so it’s highly profitable, which can’t be said for its key competitors like Disney‘s Disney+ (the third-largest streaming platform). That company just committed to slashing $3 billion from its content budget this year, which could result in a loss of subscribers — and send them running to Netflix.
The broader sell-off in the tech sector has helped send Netflix stock down 54% from its all-time high. But had you invested early, you’d still be sitting pretty. The company listed publicly in May 2002 at $15 per share, so $10,000 would’ve bought you 666 shares at that time. But after two stock splits (in 2004 and 2015), you’d have 9,324 shares today at a cost basis of $1.07 per share.
Since Netflix stock trades at $312.03 now, it has delivered a gain of 29,061%. In other words, your $10,000 would be worth over $2.9 million today! The current discount in the stock might be an opportunity for investors to capture Netflix’s next growth phase.
This content was originally published here.
