Why Should You Buy Tesla Stock Now?

Business

  • Author Jay Mehta
  • Published September 18, 2020
  • Word count 959

Tesla stock and its vocal CEO have been the talk of the town for quite a while, but is Tesla’s stock something worth investing in? Tesla is famously known to be the most followed company from the perspective of investors, and the company has shown that it prefers carrying out dramatic changes to itself.

There are many factors for why you should and should not buy Tesla stock. I’m going to try to give you a perspective that is the least biased when it comes to investing opinions.

  1. Stock Split

Tesla has recently announced it’s stock split. The entire movement is entirely new for Tesla as stock splits for Tesla stocks have not been published before. Tesla, however, seems to be following through with the apple trend where stock prices increase before the period of the announced stock split. After the announcement, the stock soared by 13%, and it is expected that there will be a slight bump in stock prices after the split following which prices will normalize.

Teslas stock split is a good thing for a couple of reasons; firstly, stock splits improve liquidity, which means that the speed of trading tesla stocks will improve in the future. Tesla announced a stock split to appeal to its investors, and the stock split strategy is used as a marketing gimmick to appeal to investors emotionally. Investors can quite easily invest in fractional shares with their available funds. However, the only difference will be that you can’t put buy limit orders with the fractional shares.

  1. Deliveries Ahead Of Schedule

Tesla has been known to overpromise and under deliver. Still, for this year, it has rolled out its generation Y ahead of schedule. Teslas shares also soared in June after the company’s statement that it had successfully delivered more than 90,000 vehicles to its customers.

  1. Tesla Reversed The Downtrend On Its Volume

While nobody denies that Teslas stock is overvalued, it is an excellent decision to invest in Tesla stock now because the stock has seen its pullback. The stock reached its highest a while back, after which the stock value was consistently declining. Tesla has recently come forward to reverse its downtrend on volume, which means that the pullback period is over and that the stock price will eventually end up rising.

Tesla has also shown an around 700% growth recently from 2018, which means that it is an excellent option for investors looking for fast growth. Tesla is also one of the biggest market capitalization companies with stocks above 351 billion dollars. Teslas’ current PE ratio is above 950+, whereas standard automakers usually have their PE ratio up by 5–15. This can solely be attributed to investors placing in their money in Tesla for the future. And judging from the current trends, the company has been able to price in 3–7 years of its growth, which is phenomenal.

  1. There Is A Chance That Tesla Might Be Included In The S&P 500.

While we don’t know whether or not Tesla will be included in the S&P 500, but there is a high likelihood that Tesla will be included in the S&P 500 because they do meet all the requirements. Two Stock analysts have also gone forward to upgrade Tesla, Adam Jones from Morgan Stanely, and John Murphy from Bank of America. The positive reviews mean that the stock price for Tesla stock will go up.

  1. Cons

But everything is not so perfect as it seems with Tesla. There are a lot of Tesla fanboys present in the market that will dislike what I will say. But, Tesla has historically been a controversial stock. The company has high expectations to uphold in the eyes of the investors, and it has also not been able to keep pace with its growth plans historically.

While the stock split is nothing more than a marketing strategy to bring Tesla stock prices back up, many investors have rushed into the region and, as a result, brought the stock price up considerably. Tesla stock split doesn’t increase anyone’s ownership of the company; it just makes the stock more open to a larger segment of the market. Tesla stock also does not give out any dividends. Hence, investors need to vary of that before placing their money in the stock, and their stock is already overvalued.

The Verdict

If you’re thinking about investing in Tesla only for the capital gain, then this is the perfect chance for you because the stock is geared to increase in price immediately. If you’re reading this now, then you have probably missed out on some of the price increase. Tesla stock price is also expected to increase after the stock split when it is made more available to the broader market, so if you don’t have the budget, then you can also wait until after the stock split to invest in the stock. You can also invest in partial shares if you want to invest in Tesla stock before the stock split.

However, if you’re an investor that wants to make investments for the long term, then Tesla might not be the best choice for you because the stock is already majorly overvalued and while there might be growth in the longer term it won’t be as much as the growth in the short term. When it comes to Tesla, the company is very unpredictable, and there is no knowing where the stock prices may go in the future. They have a higher amount of market volatility than their competitors, and a high and stable EPS share, which can be attributed majorly to the market expectations.

To sum it up, short term investors should invest in Tesla stock because the situation seems promising right now.

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