Thanks to its CEO, Elon Musk — a prolific inventor who is often referred to as the 21st century’s Thomas Edison — the company has garnered an overwhelmingly positive public perception. The value of TSLA (Tesla stock ticker) shares exploded in 2020, and the long-term predictions are quite optimistic, making the stock one of the most popular buys.
Are you just entering the stock market, wondering how to buy Tesla stock? Or maybe you’re an experienced trader looking for more information on the company and the shares’ performance perspective? Either way, you’re in the right place — we’ve compiled all the necessary info for you.
About the Company
Tesla was founded in 2003 in San Carlos, California, by prominent engineers Marc Tarpenning and Martin Eberhard. Named after the Serbian inventor Nikola Tesla, the company intended to make affordable and reliable electric vehicles, helping the push towards a net-zero carbon emission future.
The person most associated with Tesla today, Elon Musk, joined the company in 2004, investing $6.3 million as venture capital. If you’re just about to ask “how much of Tesla does Elon Musk own,” the answer is 21%. But he has pledged over 50% of his stake as collateral for loans.
By 2006, Tesla had released its first prototype — an electric sports car Tesla Roadster. The company started serial production in 2008, proving that it’s capable of manufacturing an electric vehicle comparable to gasoline-powered automobiles.
Stamping its viability, the company went public on NASDAQ under the Tesla stock symbol TSLA on June 29, 2010. The initial public offering (IPO) raised $226 million, issuing 13,300,000 common stocks at $17 per share.
In the following years, Tesla has expanded its product range beyond cars. It bought the solar panel manufacturer SolarCity in 2016. Reflecting on the business model change, the company rebranded from Tesla Motors Inc. to Tesla Inc.
Toward 2020, Tesla experienced significant financial troubles, one of the notable incidents involving Elon Musk’s statements on Twitter. But after the 2020 COVID-19 market crash, Tesla stock prices have surged to an all-time high.
At the time of writing, the stock value is still climbing, breaking all resistance levels. What’s more, on January 8, 2021, the TSLA stock reached its highest price so far — $880.02. On March 8, however, it plummeted to $563, only to start rising again. On March 19, the stock price for Tesla opened at $646.60.
The question that you have to ask yourself is: “Is this trend bound to continue?”. Let’s dig deeper and find out.
Should I Buy Tesla Stock?
Deciding to purchase individual stocks should be a decision backed by hard facts. The company’s business history, current standing, and future plans should all be considered. Тhe more you know, the more likely you are to make a viable investment.
Closely examining the company’s recent business decisions is a necessary step toward seeing the bigger picture. Some of the latest milestones in Tesla’s business dealings imply a bright future for the company and, at the same time, better opportunities for all investors in Tesla:
- From July 2019 to June 2020, the company recorded four profitable quarters in a row for the first time in its almost two-decades history. The robust period made Tesla eligible for inclusion in the S&P 500 index. The company joined the benchmark for large US stocks on December 21, 2020. The event marked a new record in the Tesla stock price history, with shares closing at a new all-time high of $695.
- On August 31, 2020, Tesla completed a five-for-one stock split. This made the shares much more affordable. But a strong momentum has boosted the stock to more than half of its pre-split value. Does that mean we can expect another split in 2021? Some market watchers believe so. But investors looking forward to buying Tesla stock shouldn’t count on that, as there’s no official information confirming such projections. It’s disputable whether there will be a similar split ever again.
- In December 2020, Elon Musk moved from California to Texas, suggesting that the company will relocate with him in the near future. This is due to California’s increasing business taxes and local officials’ refusal to let Tesla reopen its factory during the Covid-19 pandemic. The headquarters’ relocation may mark the beginning of California’s Big Tech exodus and affect Tesla’s profits, as Texas has no state income tax, while California’s is the highest in the US. Currently, a new Tesla factory is under construction in Austin, Texas, but the Californian plant is still running.
Tesla’s Stock Performance
Unlike sales, which are gradually increasing for several years now, Tesla stock market prices encountered severe losses during the 2016-2018 period. At the time, the company had to raise more money for its operations funding, which is a warning sign.
When it comes to warning signs, there are a few that may make you reconsider your decision to invest in Tesla stocks at the moment. So, let’s discuss them.
The first is that Tesla is using debt to finance its business operations. The company’s total debt amounted to $9.6 billion as of December 2020. According to Tesla’s latest annual filings, that made up almost 34% of the company’s total liability.
The next warning sign is that its gross margin is in decline. The average decline of gross margin rate is currently about 9%, meaning that Tesla makes less money per product sold.
Finally, there is a certain dissonance between asset growth and revenue growth. If the asset growth continues to outgrow the revenue, the company is in danger to become less efficient. In December 2020, Elon Musk warned his employees that Tesla’s actual profit margin is fairly low at 1% and that the recent share price surge is due to investors’ expectations of future profits rather than results.
During the Thanksgiving season 2020, the stock prices for Tesla reached all-time highs, standing at over $500 for 52 weeks in a row. The lowest point during that period was $67.27. This kind of volatility is expected to continue in the future, but the long-term predictions are still mostly positive.
Before you start building your portfolio or enriching your existing one, remember the importance of diversification. Useful advice to everyone who is trading stocks is not to spend all your money investing in Tesla. Instead, you should strategically spread your capital to avoid losing all your funds, should any adverse movement surprise you. An ideal portfolio consists of 20-30 stocks of different companies.
Individual stocks aren’t the best way to build an impressive investment portfolio. If you decide to invest in Tesla as an individual stock, you need to keep the positions between 3% and 5%.
On the other hand, if you already have a very diversified portfolio, ask yourself if Tesla fits there naturally. Have you had a chance to be exposed to the automotive industry? Do you have enough knowledge of it?
A strong investment portfolio is a balanced mix of bonds and stocks, but in the end, you still have the final word. Define your goals, long and short-term, and think about your risk tolerance.
How to Buy Tesla Stock?
Tesla is trading on the NASDAQ exchange under the ticker symbol TSLA. The company doesn’t offer direct stock purchase options, so you can buy equities only via a broker.
If you are a complete beginner, don’t worry. Opening a brokerage account is quite easy, taking just about 15 minutes of your time. You only have to decide which one is the best option for you.
Account opening is quick and straightforward and typically requires you to provide certain personal and contact information, such as:
- date of birth
- Social Securities Number (SSN)
- phone number
- email address
No matter which brokerage platform you choose, there are two ways of purchasing shares. You can execute a market order and buy Tesla stock at current prices or make a limit order and purchase the shares when they reach a particular preset value.
Before buying stock in Tesla you can consult a financial advisor. As a beginner, it can be a great option for you to gain some much-needed expert insight on how to invest in Tesla.
Trading advisors can deter you from making rash financial decisions and help you achieve your long-term investment goals. Just make sure you choose the right service, as you can consider that as an investment itself.
Are you still wondering “should I buy Tesla stock”? The answer depends on your risk tolerance, trading style, and long-term goals.
Stock market exchange is a long game. Success rarely comes overnight. Planning is half the battle, and calculated moves can bring you a larger profit than rash ones. Going for the long haul may seem unfulfilling, but if you are a beginner, take our word of advice — take it slow, and learn as much as possible.
We hope that you now understand how to buy Tesla stock. Whether it’s your first equity or just one of many in your portfolio, long-term investment in this prospective company could prove to be profitable. Just as always, only invest the money that you can afford to lose.
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