Is TSLA Stock a Solid Long Term Investment?


Tesla’s stock has had a fantastic past few months, given the recent snags such as a faulty launch of its driver-assistance software and uncertainty about whether Hertz truly signed a deal to purchase 100,000 automobiles from Tesla, the electric automaker company. Tesla’s (NASDAQ: TSLA) stock price surpassed $1,000 in October, and the company’s market valuation surpassed $1 trillion. It’s a situation with many Tesla investors ecstatic about the company’s surge, leaving others wondering if it is late for them to have a long-term investment and profit from the TSLA stock. On the other hand, Tesla is one of the most shorted, or wagered, stocks on Wall Street. Tesla Inc. (TSLA) is an automobile company, and you should be familiar with roller coasters if you want to invest in TSLA stock. Let’s discuss if buying Tesla shares now still makes sense in the long run.

TSLA Stock Value During the Past Years

If you had invested in TSLA stock in 2011, you would have made a five-figure profit. Over the course of ten years, Tesla progressed from selling only the Roadster Model to selling the Model S, Model X, and Model Y. On November 2, 2016, TSLA stock was trading at roughly $38 per share. A $1,000 stake would have risen 3,025% and would be worth approximately $31,286. If you had decided to buy TSLA stock in November 2020, when it was worth somewhat more than $400 per share, you would’ve roughly doubled your investment. According to CNBC analysis done, a $1,000 investment last November would be worth roughly $2,940, or a 193% return. Regardless of Tesla’s tremendous stock increase, each individual stock can outperform or underperform, and previous performance does not foretell possible future outcomes.

TSLA Stock Value Forecast

As previously said, Tesla has had a successful month and year. The TSLA stock price has gained 62% between early December 2020 to December 2021. The fact that Tesla is always innovating is the most evident aspect driving Tesla’s stock prices. There is also no doubt that the globe will embrace electric automobiles during the next several decades. Tesla already has an advantageous position in this rapidly expanding market. Furthermore, any rises in fuel prices or regulatory changes on more conventional internal combustion engines in the coming years may help the automobile company. So, what is TSLA stock’s long-term forecast? According to MarketBeat’s analysis, the consensus price estimate for the coming year is $754.21, representing a 25% drop from the current $1,014.36 level. When looking for TSLA stock predictions, keep in mind that analysts’ estimates and target prices for Tesla stock in the coming years can be incorrect. Analysts forecast the future based on the underlying and technical analyses of the stock’s performance. Past returns are not an indication of future outcomes.

Things to Consider Before Buying TSLA Stock

If you want to buy Tesla (TSLA) stock, now that shares are considerably more reasonable, here are the things you should consider first. Before you consider investing in TSLA stock, take a look at the company’s fundamentals to discover what you’re actually getting yourself into. Remember that you’re buying a little share of a real firm when you buy a stock. It’s tempting to buy volatile stocks when they’re cheaper, but doing so might be dangerous. If you invest in a highly volatile stock and it quickly drops, you may just lose a few bucks. However, if it performs well, you may be tempted to increase your investment. Volatile stocks can produce tremendous returns, but even those returns or profits may not be sustained. If you keep investing more and more when the stock is soaring, you risk losing a lot of money if the stock suddenly falls. Even if you’re only investing small amounts of money, it’s critical to conduct your research before making investments in the stock. Companies with strong core business fundamentals make the best investments. These shares are unlikely to make you rich immediately, but they are more likely to provide solid long-term investment.

If your budget is limited, fractional stocks can be an excellent investment option. With this approach, you’ll be able to buy TSLA stocks no matter how much money you have to spend, and you’ll be well on your way to establishing a successful investment. You can get research, analysts’ evaluations and ratings, and other important Tesla information through your investment portfolio or a company’s financial website. You should also think about how much you want to put into the TSLA stock. This is influenced to some extent by the amount of money you have to invest. You should consider how much of your investment you want to associate with Tesla’s company performance, as well as where you stand in terms of other financial aspirations.

Cash and Commodities

Tesla has a market valuation of over $600 billion, which is greater than the sum of its top contenders. In a rapidly changing industry like electric mobility, buyers are prepared to pay extra for a stock that they believe will be dominant in the future and are considerably more likely to discount the largest corporations, irrespective of their existing financial statements.

Increased Sales

In previous years, top-line sales growth and a rise in the number of vehicle sales boosted TSLA stock nearly entirely. TSLA’s CEO Elon Musk had set an ambitious 500,000 vehicle objective for the organization five years ago, which it met last year. Tesla fans who bought in the intervening period were handsomely compensated. Even in the face of supply-chain difficulties, such as the shortage of semiconductor chip required for the electronic systems of modern vehicles, which is rattling the auto sector, Tesla’s sales growth this year remains remarkable.

Cash Flow

One sector where Tesla has seen progress is in free cash flow. Most investors prioritize cash-flow generation in an elevated world’s marketplace where the time worth of money is significant. This is especially true for a growth-oriented organization like Tesla, which requires considerable free cash today in order to meet aggressive operational ambitions. Astute investors would point out that cash flow in a context is meaningless. The Free Cash Flow Yield of TSLA stock, which is computed by dividing its historical cash flow by its current stock price, isn’t quite as remarkable. It’s upbeat, which really is a good indication. However, for those expecting TSLA to evolve into a substantially profitable company with solid operational metrics is an indication that there is still a lot of work to be done.

Profitability and Market Power

Despite the fact that Tesla sold approximately twice as many cars and SUVs, revenue surged by just about 74%. When combined with the large year-over-year decline in profitability ratio, this presents a picture of Tesla generating less cash per vehicle as it expands, even while incumbent auto manufacturers saw their margins improve at the very same time.

Pros of Buying TSLA Stock

1. The World is Shifting Toward Electric Vehicles

Global electric vehicle (EV) sales were 2.6 million units in the first half of 2021. It doesn’t appear to be much. However, unit growth was up 160% compared to the first half of 2020. This is more than six times the rate of the overall automobile market. The growth in EVs may be invisible to US investors because adoption is stronger in Europe and China. China accounts for around 44% of all EVs. Approximately 31% are in Europe. The United States is home to only 17% of the world’s hybrid electric vehicles. In 2016, EVs accounted for fewer than 1% of total new vehicle sales worldwide. By last year, that figure had risen to 4.6%. The rate of adoption is increasing. According to Wood Mackenzie, an energy research group, that figure is presently at 7%. Many people think that by 2035, EVs will account for 25% of all sales.

2. Self-driving Vehicles Trend

Tesla is not simply a wager on the electrical vehicles industry, but TSLA investors stand to profit from the massive self-driving car movement as well. Canaccord Genuity recently increased its view on TSLA stock, citing the company’s automated driving software as a key reason for the upbeat outlook. Canaccord Tenuity believes that TSLA’s technology has an absolutely enormous advantage over its competitors in the automobile industry.

3. The Demand is Rising

One of the main reasons traders have been hesitant to invest in Tesla shares has been the company’s inability to earn an adequate return. The trend, though, looks to be changing. As previously stated, Tesla is likely the only carmaker that has fully committed to the electric mobility trend. As automobiles gain traction and more people transition to electric vehicles, this might prove to be a huge reward for investors. Consumers see a large cost advantage with electric vehicles over gasoline ones, and that margin is unlikely to narrow as days go by. Last year, for example, Tesla was able to produce acceptable earnings for two consecutive quarters, and this trend will continue in the coming years.

Cons of Buying TSLA Stock

1. There are Still Some Doubts

While there is plenty to appreciate about Tesla’s future prospects, TSLA also bears a high degree of risk. For starters, it’s unclear how long Tesla has to wait before the autonomous car trend completely comes to pass. Many people feel that TSLA has been overly enthusiastic in its estimates for the transition from fuels to mobility, which could be costly for Tesla investors. If e – mobility usage accelerates in the next years, Tesla will be well-positioned. However, if it takes a bit longer to gain popularity, the company would struggle to repay the investment of its enormous manufacturing in the coming years.

2. Cheap Gas Prices

When gasoline prices fell in 2014, Tesla’s attractiveness started to fade. Internal combustion engine vehicles compete with Tesla’s electric vehicles, and lower gas prices make internal combustion engine vehicles more economically appealing. Fuel supplies are growing as gasoline engines are becoming more fuel-efficient. According to the U.S. Energy Information Administration, the national average price of gasoline is $3.34 per gallon, which is more than $1 higher than December 2020. While prices remain hefty, they are lower than last few weeks—and more respite could be on the way. According to the U.S. EIA, retail gas prices will decline to $3.01 per gallon in January next year and average $2.88 per gallon throughout the year. Tesla needs to sell a lot more vehicles if it wants to become a global automaker and produce sustainable working capital. Consumers will be reluctant to switch to electric vehicles if gasoline stays much cheaper.

3. High Expectations for the Company

The fact that the marketplace has such high expectations for the automobile company is perhaps the most crucial thing why TSLA stock is a dangerous investment. TSLA stock trades at 32.8 times expected earnings, which is much higher than any of its automobile counterparts and more than 50% higher than tech giant and autonomous vehicle rival Alphabet Inc. High market capitalization is good as long as the company can live up to those expectations, but it is crucial to realize that such high ambitions come with uncertainty. Any mistake, in terms of development or implementation, the stock is highly likely to plummet.

The Bottom Line: Is TSLA Stock a Solid Long Term Investment?

Tesla’s success as an electric automaker is difficult to dispute, with a trillion-dollar capitalization. However, there are several other possible roadblocks to overcome, ranging from the difficulties of manufacturing affordable EV technology to the threats posed by competing companies. The journey for investors appears to be easing out as the company achieves profitability quarter after quarter. Having said that, buyers can’t overlook Tesla’s exorbitant price multiples. Moreover, despite reporting $31.5 billion in total sales for 2020, the company’s current valuation is approximately $800 billion. However, the risks remain. Tesla is no longer the only electric vehicle firm in the industry, and investors should be prepared for the possibility that Tesla’s more established rivals will overtake it. In short, investors interested in investing in long-term TSLA stocks should include them in a well-diversified portfolio/investment.

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