Since the stock market is as hot as it is right now, you’re probably looking for a way to join a stock. Tesla stock has probably passed your attention several times when researching potential stocks for selection. After all, few large companies have soared in stock price as much as Tesla.
But there are so many things to consider before you buy a stock. “Should I worry about the chip shortage? How much should I analyze electric cars? Tesla is close to record highs, but should I buy it?”
This post will answer all these questions and more. There are a few things you need to know before you buy Tesla stock, and this post will tell you all about it.
Before we get to the heart of the technical analysis of Tesla stock, it’s important to first understand the business side of Tesla and all that.
Founded in 2003 by entrepreneurs Martin Eberhard and Mark Tappenning, Tesla was originally known as Tesla Motors and was intended to develop an electric sports car. The founders wanted to create an energy-efficient and environmentally friendly car without losing any of the features of conventional gasoline cars.
Founder Elon Musk has been an ardent supporter of Tesla since its inception (donating more than $30 million in the venture capital initiation round). He was appointed president of Tesla in 2004 and has been a leader ever since.
Musk’s goal from the beginning has always been to bring electric cars to the general public. And over the years, Tesla has come closer and closer to achieving that goal. Over the years, Tesla has grown and launched several vehicles, including the Roadster (2007), Model S (2012), Model 3 (2017), and Model Y (2020).
In 2010, Tesla conducted an initial public offering (IPO) and raised more than $226 million. Tesla’s early stage investment yielded more than 300 times the initial investment. Since then, the company has grown, and today Tesla has a market capitalization of more than $1 trillion.
Before reading about Tesla stock information, it’s important to understand what all the terms mean.
Before reading information about Tesla stock, it’s important to understand what all the terms mean.
- Market capitalization: how much a given company is worth. Market capitalization is obtained by taking the total number of shares of a stock and multiplying it by the stock price.
- PE ratio: a measure of how “expensive” a company is. You can see what a company’s PE ratio is by taking the total stock price (total time) and dividing it by how much Tesla earns each year (revenue).
- Average volume: a measure of the number of shares in a particular stock transaction. Average volume is a good indicator of how “liquid” the stock is.
- Total Return (since inception): a percentage that shows how much you would have earned if you had invested in Tesla when Tesla was first incorporated.
Here is some basic information about Tesla stock that you should look at before investing. This information is compiled directly from market data provided by Yahoo Finance and is current as of January 3, 2022.
- Market capitalization: $1.205 trillion.
- Share-to-earnings ratio: 391.83.
- Average volume: 26,579,322.
- Total return: 31,144%.
Pros and cons of buying Tesla stock.
Before you invest in anything, it is important to understand the pros and cons of investing. This applies if you are buying stock in a storage company or if you are buying Tesla stock. Here are the pros and cons of buying Tesla stock.
Tesla’s advantages include:
- High production and delivery – One of the biggest benefits of investing in Tesla is the large number of electric vehicles that Tesla manages to produce and ship. In recent years, Tesla has demonstrated the ability to increase production and deliver returns to investors.
- Growth – Another promising aspect of Tesla is how much growth potential Tesla shows. After 2020, Tesla executives promised to increase deliveries by 50% over the next few years. They have (mostly) delivered on those promises.
- Upgraded facilities – Tesla also has plants and facilities around the world to support electric vehicle production. Tesla has Giga plants in Nevada, New York, Shanghai, Berlin, and Texas. Here Tesla is constantly discussing investments in new plants.
- A good macroscopic trend – Looking to the future, Tesla is certainly a promising industry. Autonomous vehicles have become increasingly popular in recent years, and these vehicles will be the main mode of transportation for cars in the future. Tesla has been creatively using cameras, radar, and GPS for years, so that the cars are (almost completely) autonomous. This is an exciting way to grow and could provide Tesla with many different opportunities.
- A greener future – Based on the previous points, the world is adopting cleaner and greener technologies. Companies focused on driving this growth are reaping huge rewards through tax breaks for themselves and consumers (encouraging more consumers to buy services/products). Since Tesla is very focused on minimizing emissions, we are ready to take advantage of this change.
Disadvantages of Tesla:
- Key Risk – In 2018, Tesla CEO Elon Musk said on Twitter that he was “considering a $420 acquisition of Tesla private.” He later tweeted, “Tesla’s stock price is too high IMO,” again reducing Tesla’s market capitalization by billions of dollars. This action forced Ilon Musk to step down as chairman of the board (in a lawsuit with the Securities and Exchange Commission), and as a result Tesla’s stock price dropped hundreds of points. The good news is that Elon Musk is great and plays a huge role in why Tesla has become so big. But the risk to the key man associated with this is pretty big. If he resigns and focuses on his other efforts (or if he gets fired for his actions), you can guarantee that Tesla’s stock price will plummet.
- High Price – The current market price of Tesla in this article is over $1,000 (you can buy all your golf clubs with that money!), the value for money is exceptionally high compared to its competitors. In other words, if you buy Tesla stock, you get a lower return (as a percentage) than if you buy stock from one of its competitors.
- Competition – Speaking of competitors, increased competition is another disadvantage of investing in Tesla stock. Just a few years ago, Tesla could proudly say that it was the only true electric car manufacturer in the industry. Today, that statement is no longer valid. The likes of Ford and GM may not yet exist, but I can assure you that they will do everything in their power to overthrow Musk and Tesla.
- The international risk is Tesla in the United States is huge, but much of Tesla’s bullishness has to do with its expansion in China. Analysts see this as a negative. Because many Chinese startups (NIO, LI Auto, XPeng (XPEV)) are threatening to encroach on Tesla’s market share and rob the company of profits.