Tesla’s ascent to the summit of the electric vehicle and battery market has been marked by impressive profitability and bold visions for the future. Notably, Tesla’s earnings soared in 2022, achieving a record $12.6 billion, despite a decline in profits the following year. Under the guidance of co-founder and CEO Elon Musk, Tesla has captured the interest of both investors and consumers alike.
For individuals probing the market on how to buy Tesla stock, this guide serves as an essential resource. It succinctly highlights the steps to invest in Tesla stock, deciphers the jargon associated with stock orders, and offers insights into managing Tesla shares. Additionally, considerations of Tesla’s stock performance and the company’s distinct approach to reinvestment are critical points of focus for potential shareholders.
Why Invest in Tesla (TSLA)
Investing in Tesla (TSLA) presents an intriguing opportunity for many, with the stock’s current price at $175.34 and a high P/E ratio of 42x, indicating that investors hold a positive outlook on its future prospects. Here are several key points to consider:
- Market Leadership and Brand Value:
- Tesla is a dominant player in the EV market, with a staggering 55% of electric vehicle sales in 2023.
- The company boasts a strong brand, valued at $50 billion, and has consistently maintained an average gross margin of 23% over the past three years.
- Tesla’s superchargers are setting the standard in North America, with strategic charging deals with major automakers like General Motors and Ford.
- Financial Performance and Growth Potential:
- Despite a slight dip in profits in 2023, Tesla has shown remarkable profitability, with profits more than doubling in 2022 and the company remaining free-cash-flow positive.
- Tesla’s stock has experienced substantial growth, gaining 8,535% over the past decade, which is significantly higher than the returns of the Nasdaq 100 and S&P 500.
- The company is positioned for future revenue growth, particularly in higher-margin service businesses like the Full Self-Driving software, which holds the potential to become a recurring revenue stream through initiatives like Robotaxis.
- Innovation and Expansion:
- Tesla continues to innovate with announcements like the reintroduction of the Tesla Roadster for 2025 and the delivery of the Cybertruck.
- Plans to produce a more affordable $25,000 electric vehicle could start as early as the second half of 2025, signaling a new growth wave for the company.
- Tesla’s energy business and AI-driven Full Self-Driving path are anticipated to contribute significantly to the stock’s value growth.
Investors should also be aware of the risks and challenges, such as the increasing competition in the EV market from both established automakers and newer entrants. Additionally, the company’s success is closely tied to CEO Elon Musk’s performance and focus. Before investing, it is essential to understand Tesla’s financial health by analyzing its balance sheet, income statement, competition, and management. While Tesla does not pay dividends, preferring to reinvest back into the company’s growth, this strategy may not align with those seeking passive income. Understanding these dynamics is crucial for anyone looking to invest in Tesla stock.
Setting Up Your Brokerage Account
To begin investing in Tesla stock, the initial step is to establish a brokerage account. Here is how to navigate the setup process effectively:
Choosing the Right Brokerage
- Type of Brokerage: Decide between an online broker and a robo-advisor. Online brokers, such as Charles Schwab, Interactive Brokers IBKR Lite, and Webull, offer a hands-on approach with a variety of investment choices. Robo-advisors like Betterment and Wealthfront manage your investments using algorithms, suitable for a hands-off strategy.
- Account Ownership: Determine whether you need an individual, joint, custodial, or a specific account like a 529 Savings Plan for educational purposes.
- Investment Style: Consider if you are an active trader or a passive investor. Active traders may prefer online brokers with a range of tools, while passive investors might lean towards robo-advisors or seeking a financial advisor.
- Minimums and Fees: Confirm the broker’s policy on account minimums and trading fees. Many offer commission-free trading, but be vigilant about hidden costs like less favorable trade fills.
Setting Up Your Account
- Personal Information: You’ll need your social security number, date of birth, address, and employment details.
- Financial Details: Be prepared to discuss your net worth, investable assets, and investment goals. This is part of the “Know Your Client” regulations.
- Funding Your Account: Link a bank account using the bank’s routing number and your account number. Consider setting up a regular transfer to support consistent investing.
- Account Type: Choose between a taxable brokerage account for general investing or an IRA for retirement savings, with options like Traditional or Roth IRAs.
Funding and Trading
- Transfer Methods: Utilize electronic funds transfer, wire transfer, or checks to deposit funds into your account. The time for clearance may vary.
- Investment Choices: Decide on the types of assets you’re interested in, such as stocks, ETFs, or mutual funds.
- Fractional Shares: Platforms like Interactive Brokers and Robinhood offer fractional share investing, allowing you to purchase less than one full share of Tesla.
- Research and Tools: Leverage the broker’s research and education features to make informed decisions, especially if you’re new to investing.
Remember, choosing the right brokerage and account type is crucial to your investment journey. Take advantage of the resources and tools provided by your chosen platform to manage and grow your Tesla investment effectively.
Understanding Different Types of Orders
When you’re ready to invest in Tesla stock, understanding the types of orders can help you execute your investment strategy effectively. Here’s a breakdown of the common order types you’ll encounter:
Market and Limit Orders
- Market Order:
- Executes immediately at the current market price.
- Best for high liquidity stocks like Tesla, ensuring quick execution.
- The price paid may vary slightly due to market volatility, especially during market open or close.
- Limit Order:
- Sets a specified price to buy or sell, offering more control over the transaction price.
- Useful for setting a target entry or exit price, but execution is not guaranteed if the market doesn’t reach your specified price.
- Typically incurs higher commissions than market orders, with the cost difference ranging from a few dollars to over $10.
Specialized Orders
- Stop-Loss and Stop-Limit Orders:
- Stop-Loss Order: Activates as a market order once the stock passes a certain price, aiming to limit potential losses.
- Stop-Limit Order: Like stop-loss but includes a specified limit price, providing control over the price at which the order executes.
- All or None (AON), Immediate or Cancel (IOC), and Fill or Kill (FOK):
- AON: Ensures the entire order quantity is filled or none at all, ideal for large orders.
- IOC: Executes any portion of an order that can be filled immediately, canceling the unfilled portion.
- FOK: Requires the entire order to be filled instantly; otherwise, it’s canceled, suitable for traders who need precise execution.
- Time-Based Orders:
- Day Order: Expires at the end of the trading day if not executed, default for many trades.
- Good ‘Til Canceled (GTC): Remains active until executed or canceled by the investor, useful for longer-term strategies.
Considerations and Best Practices
- Priority and Execution: Market orders usually have the highest priority, followed by limit orders.
- Stock Characteristics: Market orders are ideal for large-cap stocks and ETFs, while limit orders are better for illiquid stocks or those with large bid-ask spreads.
- Automatic Triggers: Be mindful of tax implications when using orders with automatic triggers like stop-loss orders.
- Brokerage Options: Not all brokerages offer every type of order, so check with your platform for availability.
Remember, while market orders are commonly used for their immediacy, limit and specialized orders give you more control over your investment, especially in volatile markets. Consider your investment goals, the liquidity of Tesla stock, and the bid-ask spread when selecting your order type.
Analyzing Tesla’s Stock Performance
When analyzing Tesla’s stock performance, it’s essential to consider its historical trends, recent earnings, and market forecasts. Here’s a detailed breakdown:
Historical Performance and Current Valuation
- Initial Public Offering: Tesla went public in 2010 with shares priced at $17.
- Recent Stock Price: The latest available price for TSLA is $175.34.
- 52-Week Range: Tesla’s stock has fluctuated between $152.37 and $299.29 over the past year.
- Peak Performance: The stock reached an all-time high of $1,229.91 in December 2020.
- Current Market Capitalization: Tesla is valued at $558.42 billion.
- Price-to-Earnings Ratios:
- PE Ratio: 40.78
- Forward PE: 55.30
- EPS (ttm): 4.30
Earnings and Forecasts
- 2023 Revenue: Tesla’s revenue was $96.77 billion, up 18.80% from the previous year .
- 2023 Earnings: The company reported earnings of $15.00 billion, a 19.44% increase.
- Stock Price Forecast: Analysts predict a 12-month target of $221.5, a 26.33% increase.
- Earnings Per Share: Wall Street anticipates a slight decline in EPS to $3.07 for 2024.
Recent Trends and Analyst Expectations
- Price Movements:
- The stock has seen a 1-day decrease of 1.85%.
- Over the past month, TSLA has fallen more than 6%, but has surged 98.9% year-to-date.
- A significant rebound with a rise of over 50% as of 6 April 2023.
- Long-Term Investment Outlook: Analysts suggest considering Tesla as a long-term investment due to its potential for continued earnings growth.
- Market Strategy Impact: Tesla’s global price cuts have led to a sharp decrease in auto gross margins, now below 20%.
Investors should weigh these factors against their investment goals and risk tolerance. Tesla’s performance in the stock market reflects its innovative business model and market influence but also underscores the volatility inherent in the tech and automotive sectors.
Managing Your Tesla Investment
After purchasing Tesla stock, it’s crucial to actively manage your investment to ensure it aligns with your financial goals and risk tolerance. Here are key strategies to effectively manage your Tesla shares:
Portfolio Management
- Assess and Adjust: Regularly review your portfolio to ensure Tesla’s stock aligns with your investment goals. If Tesla represents more than 20% of your portfolio, consider rebalancing to mitigate risk.
- Diversification: To counteract the risks associated with Tesla’s volatility, diversify your investments. Consider including stocks from different sectors or investing in real estate, which offers potential for rental income and capital appreciation.
- Real Estate Alternatives: Explore real estate crowdfunding platforms such as Fundrise for non-accredited investors, or CrowdStreet for accredited investors, to diversify your investment portfolio.
Investment Strategies
- Dollar-Cost Averaging: To reduce the impact of volatility, invest a fixed amount in Tesla shares at regular intervals, regardless of the share price.
- ETFs for Exposure: For those uncomfortable with direct stock purchases, gain Tesla exposure through ETFs like the iShares Russell 1000 Growth ETF (IWF) or Vanguard Growth ETF (VUG).
- Risk Management: Set stop loss or take profit levels to manage your investment risk effectively. This helps lock in profits and limit losses.
Market Analysis
- Monitor Market Conditions: Keep an eye on factors such as competition in China, rising interest rates, and overall market trends that may affect Tesla’s performance.
- Tesla’s Developments: Stay updated on Tesla’s production expansion plans and partnerships, such as supercharger networks, which may influence the stock’s value.
- Competitor Performance: Compare Tesla’s stock performance with other companies in the “Magnificent Seven” and the broader market to gauge its relative strength.
By implementing these strategies, you can maintain a balanced investment approach, leveraging Tesla’s growth potential while managing associated risks.
End Lines
Throughout this guide, we’ve navigated the roadmap of why investing in Tesla is an opportunity worth considering, supported by an in-depth view of the company’s market leadership, financial health, and innovative trajectory. The strategies laid bare for setting up a brokerage account, comprehending various order types, and analyzing Tesla’s dynamic stock performance serves as a launchpad for informed investment decisions. Keeping in mind Tesla’s ambitious expansion plans and the potential revolution of the automotive and energy sectors, the weight of such an investment beckons a strategic and measured approach.
For those ready to embark on the journey of investing in Tesla, the prospect carries with it a blend of excitement and prudence. Investors must stay vigilant, continuously assessing their portfolio to ensure alignment with evolving financial objectives and market conditions. As you consider diversifying your investments and securing a stake in Tesla’s future, remember to explore suitable brokerage options that align with your investment philosophy and facilitate your entry into the electric revolution that Tesla spearheads.
FAQs
Q: What are the steps to purchase Tesla stock?
A: To buy Tesla shares, follow these six steps:
- Choose a reputable online stock broker. Our experts have selected the best stock brokers for you.
- Open your brokerage account with the chosen broker.
- Deposit funds into your account.
- Access the broker’s trading platform.
- Place a market or limit order to buy Tesla stock.
- Regularly monitor your investment in Tesla.
Q: What is the projected value of Tesla stock in 2025?
A: By 2025, Tesla Stock (TSLA) could potentially increase by more than 260%, reaching an additional $500 in value within just one year. This projection is based on a combination of intelligent analysis and educated predictions.
Q: What is considered a reasonable price to pay for Tesla stock?
A: The consensus average price target for Tesla stock is $211.62, which is based on the 12-month price targets from 35 Wall Street analysts made in the last three months. The highest price target given by an analyst is $345.00, while the lowest is $23.53. This average price target suggests a 17.47% increase from the current price of $180.15.
Q: Is it possible to buy Tesla stock through Fidelity?
A: Yes, Tesla stocks can be traded through Fidelity. Fidelity offers free stock and ETF trading. To stay updated, you can check the current price of Tesla stock on their provided chart.
Disclaimer – The information mentioned in this article is based on our Research and Knowledge. *This is not a financial Advice to invest. Do your own research or consider taking advice from your financial adviser before investing in any stock.