Tesla Stock Forecast
Tesla (Nasdaq: TSLA) is one of the most talked-about and analyzed companies in the world. I’ll cover some common topics in this Tesla stock forecast. Although, there are some unique facts that many investors overlook…
The electric car company was started in 2003 by Martin Eberhard and Marc Tarpenning. In 2004, Elon Musk invested $6.5 million and altered the course of the company. He took over as CEO in 2008 and has led Tesla ever since.
When talking about Tesla, it’s almost impossible to not mention this larger-than-life CEO. Elon Musk acts a little bit like a real-life Tony Stark from Iron Man. For starters, he is one of the richest men in the world and could be the world’s first trillionaire.
Elon Musk has single-handedly ushering in a new era of transportation and his ambitions aren’t just limited to cars. Musk also runs a successful commercial spaceflight company called SpaceX. On top of that, he has expressed interest in building massive underground tunnels.
However, despite his success, Mr. Musk is not always the golden child CEO that investors might hope for. Elon has been known to use creative accounting techniques to show profitability. He regularly pumps cryptocurrencies with his tweets. He has even mocked investors who short Tesla stock.
So is Elon Musk a visionary leader that’s revolutionizing human transportation? Or is Tesla stock mainly fanfare with very little to show under the hood?
Let’s take a look at a Tesla stock forecast and find out.
Tesla Stock Forecast
Tesla announced earnings on October 20th, 2021.
Note: I’m not a financial advisor and am just offering my own research and commentary. Please do your own due diligence before making any investment decisions.
What Does Tesla Do?
Tesla makes the majority of its money from the sale of electric vehicles. On the Tesla website, there are four models for sale. These are the Model S, Model 3, Model Y and Model X. It’s a little unclear why these specific letters and numbers were chosen. Tesla’s Model 3 is especially popular and is the all-time best-selling plugin electric car worldwide.
In addition to electric vehicles, Tesla also sells a range of battery energy storage products. In fact, in 2020 it actually captured 16% of the plug-in market and 23% of the battery market.
Here are a few of the announcements recently that have impacted Tesla stock.
Recent Tesla Announcements
- Moving HQ to Austin – Tesla is moving its headquarters from the Bay Area to Austin. CEO Elon Musk claimed that the move is due to the high cost of living in San Francisco. Austin should provide the company with much more room to expand its operations.
- Chip Shortage – There is an ongoing chip shortage that is impacting many automakers. Luckily, Tesla was able to avoid any serious issues with delivering vehicles. However, this chip shortage is expected to go into 2022.
- Tesla Insurance – Teslas are essentially computers on wheels. Due to this, they collect plenty of information about the drivers and their habits. Based on drivers’ “Safety Scores” they will be able to qualify for more accurate insurance premiums.
Tesla Stock Price Forecast
Buying Tesla stock today is a little bit like an NBA team drafting a rookie LeBron James instead of signing a veteran Michael Jordan. The thinking is that Rookie Lebron is going to be the future of the league. On the other hand, Michael Jordan’s best years are probably behind him.
With Tesla, this means that it is not necessarily an incredibly successful company yet. However, investors fully expect that it will be incredibly successful in the future.
That said, Tesla shocked its doubters in 2020 by posting its first-ever profit. It posted an annual net income of $721 million on revenue of $31 billion. So far, Tesla has kept the profitability train rolling into 2021. In its Q3 2021 earnings report, Tesla announced a trio of all-time highs. It achieved its best-ever net income, operating profit and gross profit. Q3 2021 revenue was $13.7 billion and net income was $1.6 billion. This profit in Q3 2021 was bigger than Tesla’s entire 2020 profit.
After a slow start to 2021, Tesla stock recently notched another all-time high. Tesla’s stock is up 40% so far in 2021 and is up well over 2,000% over the past five years.
With its sudden profitability, Tesla has certainly surprised some investors. So should you rush to buy Tesla stock? Or are there a few other things to consider?
Should I Buy Tesla Stock? Potential Upsides
To be fully transparent… I’ve never ridden in a Tesla. However, the general consensus seems to be that they’re awesome. Tesla is one of the few companies where words like “magic” and “experience” are thrown out. A few other companies that receive praise like this are Disney and Apple. This definitely puts Tesla in good company.
It’s also worth noting that, even though other car companies offer electric vehicles, none of them seem to get this same praise.
In its most recent earnings report, Tesla pointed out that there is an EV buying shift towards lower-priced vehicles. Even though it might hurt short-term revenues, Tesla believes that this is a good thing. More sales of lower-priced Teslas will ultimately get more Teslas out in the wild. The more people that own a Tesla, the more people who will be preaching the benefits of owning a Tesla to their friends.
Also, in today’s investing environment we have to mention The Meme Effect. Tesla is one of a few companies that gets very strong support from retail investors. These investors are generally incredibly loyal to the companies that they like (this loyalty is referred to as having “diamond hands”).
These investors will refuse to sell a stock through thick and thin and will rave about it on social media. Tesla definitely has the support of the retail community and it’s one of the reasons why the stock surged almost 900% in 2020. Companies who have this support are dangerous to bet against (just ask GameStop shorts).
So far, Tesla’s got:
- Sooner than expected profitability
- Few true competitors in the EV industry
- A high quality product
- A loyal base of investors
However, as we know, no stock is a sure thing. Let’s take a look at some potential downsides to with this Tesla stock forecast.
Should I Buy Tesla Stock? Potential Downsides
I’m usually not the type to harass a company about its valuation. However, Tesla might be a unique exception. Tesla currently trades at a P/E ratio of over 300. This means that its per-share price is super high for how much money it actually makes. Tesla also has a market cap that’s recently hit $1 trillion (there are currently only six companies valued at $1 trillion or more).
For example, another company valued at close to $1 trillion is Facebook. In 2020, Facebook posted a net income of $29 billion and revenue of $86 billion. This completely dwarfs Teslas 2020 net income of $721 million and revenue of $31 billion. It just feels as if these two companies shouldn’t be in the same ballpark when it comes to market capitalization (yet!).
Also, compare Tesla’s market cap to other automakers:
|General Motors||$84 billion|
|Combined Market Cap||$629 billion|
Tesla’s Market Cap = $1,000 billion
I get that people are excited about Tesla and the company definitely has a lot going for it. It just feels as though the market has gotten carried away. Is Tesla really more valuable than the next five biggest automakers combined?
So far, it seems as though Tesla stock has enjoyed an early-mover advantage in the electric vehicle space. It’s definitely the most popular EV company but that’s also because it’s one of the only names in town. What happens when other automakers inevitably catch up to Tesla and produce electrified versions of their own popular models.
The most popular car in America is the Ford-150. Ford has already announced that an electrified version should be released in 2022. What happens when the incredibly popular Jeep Wranglers are electrified? What about when Mercedes, BMW and Audi’s are all electrified?
You’d have to imagine that, once consumers have plenty of options for electric vehicles, Tesla’s might lose a little bit of their shine. Truck people will stick with their Ford-150. Jeep people will stick with a Jeep. Sportscar people might stick with the fully electrified Mercedes, BMW, Range Rover, etc.
In the coming years, Tesla could face much stiffer competition than it has so far. However, tesla’s stock price has already priced in incredibly high future sales. If it falls short of these sales goals then its stock price could potentially come crashing down.
The U.S. Government is also currently investigating Tesla’s Autopilot program after a series of crashes.
Before investing in any company, it’s important to try and poke as many holes as you can. Tesla certainly has a lot going for it. However, it also has quite a bit to live up to.
I hope that you’ve found this Tesla stock forecast to be valuable when deciding whether or not to invest in Tesla stock! As usual, all investment decisions should be based on your own due diligence and risk tolerance.
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About Teddy Stavetski
A University of Miami grad, Teddy studied marketing and finance while also playing four years on the football team. He’s always had a passion for business and used his experience from a few personal projects to become one of the top-rated business writers on Fiverr.com. When he’s not hammering words onto paper, you can find him hammering notes on the piano or traveling to some place random.