Should I Invest in Tesla Stock?

Roberto Rivero

Electric Vehicle (EV) ownership is on the rise and, due to high oil prices and the need to reduce our emissions, it is a fairly safe assumption that demand for EVs will continue to rise in the future. Although competition has increased recently in the EV sector, there is still one undisputed king: Tesla.

In the last few years, investors have swarmed to buy Tesla shares, turning it into the most valuable car manufacturer in the world. But is it too late to invest in Tesla? In this article, we will look at the question, ‘should I invest in Tesla?’, taking a look at Tesla share price history, how to buy Tesla shares and much more!

Tesla Inc. - A Brief History

In less than twenty years, Tesla has gone from being founded to becoming the largest car manufacturer in the world by market capitalisation.

How did it get there? Before we look at investing in Tesla and how to buy Tesla shares, let’s take a quick look at some of the highlights of Tesla’s short, and incredibly successful, history.

  • 2003: Tesla founded by Mark Tarpening and Martin Eberhard
  • 2004: Elon Musk contributes $6.5 million out of a total of $7.5 million to Tesla’s series A funding. Musk subsequently joins the company as chairman of the board of directors
  • 2006: Tesla reveals prototypes of its first car, the Roadster
  • 2008: Tesla begins first deliveries of the Roadster, delivering 147 vehicles by the end of the year. Musk becomes CEO following the departure of Tesla founders Tarpening and Eberhard
  • 2010: Tesla launches an Initial Public Offering (IPO) on the NASDAQ, issuing 13.3 million shares at a price of $17 per share
  • 2012: Tesla launches its second car, the Model S luxury sedan
  • 2019: Tesla opens new Gigafactory in Shanghai
  • 2020: In December, following four consecutive profitable quarters, Tesla is included in the S&P 500 for the first time
  • 2021: Tesla delivers more than 936,000 vehicles
  • 2022: Tesla opens new factories in Texas and Berlin in a push to ramp up production

Tesla Financial Results – Q2 2022

2020 marked the first year that Tesla turned a full-year profit and, since then, the EV manufacturer has performed strongly. Their second quarter results for 2022 were released recently and - although lockdowns in China negatively impacted deliveries, revenue and gross profit from the previous quarter – year on year growth was very strong.

It is important to remember that, when buying Tesla shares, you are buying a portion of the company and, therefore, the success of your investment is dependent on the future success of Tesla. Therefore, before investing in Tesla, you should be sure to familiarise yourself with their recent financial performance.

In the table below, we have summarised a few of the key figures from Tesla’s recent quarterly results.

Tesla Q2 Results 2022
  Q2 2022 Q2 2021 % Change YoY
Total Revenue $16,934m $11,958m 42%
Net Income $2,620m $1,616m 62%
Earnings per Share (EPS) $2.27 $1.45 57%
Vehicle Deliveries 254,695 201,304 27%

Source: Tesla – Q2 2022 Update

When considering whether or not to invest in Tesla shares, one of the important metrics to consider is vehicle deliveries.

Tesla produces a product for which demand outweighs supply, but this excess demand is no good if Tesla is able to take advantage of it.

Tesla’s future success – and, therefore, the success of buying Tesla stock - largely depends on their ability to increase production to satisfy the high demand for their EVs.

Tesla Share Price Analysis

Since Tesla went public in 2010, its performance on the stock market has been nothing short of remarkable. Before we address the question of ‘should I invest in Tesla?’ – let’s take a look at the evolution of the Tesla share price in recent years.

Depicted: Admirals MetaTrader 5Tesla Weekly Chart. Date Range: 27 December 2015 – 21 July 2022. Date Captured: 21 July 2022. Past performance is not a reliable indicator of future results.

It’s hard to tell from the chart above, but from the start of 2017 to the end of 2019, Tesla shares gained an impressive 96%; however, it was the year 2020 when Tesla stock exploded.

A setback caused by the outbreak of Covid-19 at the beginning of the year was quickly overcome and Tesla shares closed the year with a gain of more than 740%. Along the way, Tesla dethroned Toyota as the most valuable car company in the world, gained admission into the S&P 500 and recorded its first profitable year!

2021 saw Tesla stock growth slow down as supply chain disruptions caused by the ongoing coronavirus pandemic wrought havoc around the globe.

However, despite the “slow down”, Tesla shares closed the year with a gain of 50% and a market capitalisation of more than $1 trillion, putting the EV manufacturer in a very exclusive and select group of companies which have achieved this impressive benchmark.

How much would you have if you invested in Tesla IPO?
A $1,000 investment in Tesla stock at the IPO price of $17 per share would have bought you 58 shares which, accounting for the Tesla stock split in 2020, would have been worth more than $306,000 at the end of 2021!

This year, 2022, has been less kind to Tesla shares, although this is mostly due to the general malaise which has gripped the wider stock market amidst economic uncertainty. In the first half of 2022, Tesla stock fell 36%, forcing Tesla to surrender its market capitalisation of $1 trillion in the process.

But is this latest downturn in Tesla share price a momentary blip on the way to further runaway success? Could now be an opportunity to buy Tesla shares? Or is it too late to invest in Tesla?

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Tesla Stock Split

This year, Tesla will ask shareholders for approval of a 3-1 stock split at their annual meeting on 4 August 2022. If approved, this means that all existing shareholders will receive two additional Tesla shares for every share they already own. Simultaneously, the Tesla share price would be divided by three to account for the stock split.

This would not be the first time Tesla split their stock. In August 2020, Tesla conducted a 5-1 stock split, which was followed by growth in the Tesla share price. In the chart of Tesla shares’ 2020 performance, the red indicates the date which the Tesla stock split took place.

Depicted: Admirals MetaTrader 5 – Tesla Daily Chart. Date Range: 11 December 2019 – 20 April 2021. Date Captured: 22 July 2022. Past performance is not a reliable indicator of future results.

Should I Invest in Tesla Stock?

We have seen that Tesla shares have been very successful over the past five years. But history is history, what about the future?

As we said at the beginning of the article, electric vehicles demand is rising. In 2021, electric vehicle use increased by 71% in the UK, with the Climate Change Committee calling for all new vehicle sales in the UK to be electronically powered by the end of the decade.

With this in mind, EVs are likely to represent the future of the car industry, as the planet battles to lower emissions and end our reliance on harmful fossil fuels.

Tesla saw this future earlier than most and wasted no time in positioning itself to take full advantage of this growing market. Although there are many new competitors entering the industry, Tesla has cemented its position as a market leader and, whilst many EV manufacturers struggle to deliver a significant number of vehicles, Tesla is ramping up production in a meaningful way and turning a sizeable profit whilst doing it.

However, if you are reading this and considering investing in Tesla shares, it is important to bear in mind that a lot of this information and potential success will already be accounted for in the current Tesla share price. The stock market clearly expects Tesla’s success to continue, which is why it is valued so highly.

Nevertheless, as mentioned earlier, Tesla’s share price has been dragged down this year, more due to the general market downturn rather than any wrong moves by Tesla themselves. Although, Musk’s aborted takeover of Twitter has certainly not helped matters.

This fall in share price could represent an interesting buying opportunity for Tesla stock for those who feel confident about the company’s future success.

But the question ‘should I invest in Tesla stock?’ is really one you need to answer yourself. Investing in Tesla should be a decision you arrive at from your own research, rather than blindly following advice from a stranger online.

For those who are considering buying Tesla shares, as with any other investment at the moment, you should be prepared for short-term volatility as the stock markets continue to react to economic uncertainty.

How to Buy Tesla Shares

With an Invest.MT5 account from Admirals, you can invest in Tesla shares and more than 4,300 other listed companies from around the world! In order to find out how to buy Tesla shares, read the following steps:

Depicted: Admirals MetaTrader WebTrader – Market Watch
  • Click the symbol and drag it onto the main chart to open a Tesla price chart
  • Click the ‘New Order’ button at the top of the screen, enter the number of Tesla shares you want to buy and send the order to the market in order to invest in Tesla stock!
Depicted: Admirals MetaTrader WebTrader - Tesla Daily Chart. Date Range: 30 December 2021 – 22 July 2022. Date Captured: 22 July 2022. Past performance is not a reliable indicator of future results.

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INFORMATION ABOUT ANALYTICAL MATERIALS:

The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter “Analysis”) published on the websites of Admirals investment firms operating under the Admirals trademark (hereinafter “Admirals”) Before making any investment decisions please pay close attention to the following:

  • This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
  • Any investment decision is made by each client alone whereas Admirals shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content.
  • With view to protecting the interests of our clients and the objectivity of the Analysis, Admirals has established relevant internal procedures for prevention and management of conflicts of interest.
  • The Analysis is prepared by an independent analyst Roberto Rivero, Freelance Contributor (hereinafter "Author") based on personal estimations.
  • Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admirals does not guarantee the accuracy or completeness of any information contained within the Analysis.
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