Tesla regularly receives recognition for high brand loyalty thanks to its cult customers. The company’s fan base goes beyond the people who own its electric vehicle fleet – there’s another group dedicated to Tesla’s stock and its high-profile CEO, Elon Musk.
Tesla, based in Palo Alto, Calif., launched its initial public offering (IPO) in 2010, when the company’s shares began trading at $17. Since then, the share price has multiplied. In 2020, Tesla shares reached $2,200, and in August, the company announced its first stock split (five for one), bringing the price down to around $400. share price doubled again.
In March 2022, the company announced plans to ask shareholders for approval to increase the number of shares at Tesla’s next annual meeting, which would allow the automaker to split the shares again.
Tesla stocks can be a wild ride, so here’s how to assess whether they deserve a place in your portfolio.
Tesla Stock Fundamentals (TSLA)
For many consumers, Tesla Inc. is synonymous with electric cars and the broader clean energy movement. Tesla shares are often among the most traded stocks on Wall Street, with millions of shares changing hands every day. The shares are listed on the Nasdaq stock exchange under the code: TSLA.
In December 2020, Tesla joined the S&P 500 index, debuting as the fifth-largest member at the time and the highest-ever entry into the major stock index. Tesla is also on the Nasdaq 100 high-tech index. The automaker is ranked in the consumer goods sector and is grouped alongside other consumer-focused companies such as restaurants or retailers.
To understand whether Tesla stock is a good investment, you will need to delve into the company’s finances. In its quarterly and annual earnings reports – which it shares on its website and files with the US. Securities and Exchange Commission (SEC) — Find the balance sheet, income statement and details of various areas of Tesla’s business.
You’ll also want to research the stock itself. You can find Tesla’s historical performance and key metrics like price/earnings or earnings per share on financial websites. Finally, you can read Wall Street analyst reports about the company, its valuation, competitors, the industry in general, and trends that could affect its stock price.
Tesla’s latest financial results
Wall Street has high hopes for Tesla. Tesla earned even more in the fourth quarter of 2021 than analysts were predicting. Tesla reported a profit of $2.3 billion, or $2.05 per share, a record for the company. Operating income of $2.54 per share easily beat the average analyst forecast of $2.36. Revenue increased more than 60% to $17.7 billion.
One reason for Tesla’s sales growth: The number of cars delivered in the fourth quarter jumped 71% to more than 308,000, despite the fact that the company said supply chain issues continue to limit the number of vehicles it can ship. manufacture. “Oh, this year has been a supply chain nightmare and it’s not over yet!” said CEO Elon Musk in a tweet in November.
Musk said that supply chain problems would mean Tesla, which has not introduced any new models since March 2020, will not introduce any in 2022. It could bring Tesla cars from the less well-off driving public.
Meanwhile, there has been a lot of excitement surrounding the automaker’s opening of its first production facility in Europe.
How Tesla Stocks Fit Into Your Portfolio
You can own Tesla stock without realizing it, especially if your stock portfolio includes any index funds that track the S&P 500 or Nasdaq 100. Additionally, Tesla stock is included in the holdings of over 200 different exchange-traded funds ( ETFs).
And indeed, it’s best to invest in Tesla by buying a mutual fund or ETF that invests in stocks. In this way, you can benefit from Tesla’s profits (along with a wider range of companies), diversify your portfolio (mixing different stocks) and avoid the risks associated with investing in individual stocks.
Investing in Tesla is not for the faint of heart; its stock is nearly twice as volatile as the S&P 500, and buyers hoping for a repeat of Tesla’s past performance may be disappointed. As a more mature company, it may not see the same gains going forward, and the stock has solidified some pretty significant downsides along the way. Double-digit drops aren’t exactly rare, and this stock dropped as much as 21% in a single day.
Finally, CEO Elon Musk has proven he can move a stock’s price with a single tweet. In February 2021,
Musk said the company had invested $1.5 billion in bitcoin and could accept the cryptocurrency as payment for vehicles, only to change its mind a few months later, citing the high energy consumption of bitcoin mining.
How to Buy a Tesla on a Brokerage Account
There is no “right” amount of money to invest in the stock market. This means that you want to avoid making decisions that turn out to be “wrong” for your investment goals.
Buying a Tesla is easy – all you need is an account with an online broker. A bigger hurdle can be its price, although some brokers offer fractional shares. Deciding whether buying Tesla stock makes sense for you will likely depend on whether you already have a well-diversified portfolio or are just starting to invest. Before investing in the stock market, experts recommend setting aside at least three months of spending in an emergency fund and paying off high-interest debt (such as credit cards).
If you’re new to investing, start by buying index funds and building a diversified portfolio that includes stocks, bonds, mutual funds, ETFs and alternative assets. Since individual stocks are often more volatile than the overall market, you should limit your exposure to any one stock.
Finally, remember that even the hottest stocks can get cold. Rather than focusing on finding market winners, a proven strategy is to invest in the market itself – and ride out the ups and downs over a longer period of time.