The California-based company specializes in the design, development, manufacture and sale of fully electric vehicles, plus energy generation and storage systems to boot. Additionally, Tesla also provides vehicle service centers, supercharger stations and cars with ever-improving self-driving capabilities. Its Energy Generation and Storage segment includes the design, manufacture, installation, sale and lease of stationary energy storage products and solar energy systems, along with the sale of electricity generated by its solar energy systems to customers.
On the auto manufacturing side, competitors mostly include Daimler, Ford Motor Co. ( F), Honda Motor Co. ( HMC), Nissan, Volkswagen and Toyota Motor Co. ( TM). Tesla first went public in 2010, offering 13.3 million shares at $17 per share. The stock now trades around $245 per share -- if you'd purchased Tesla at its IPO price your return on investment today would be about 1,350%.
Tesla's stock story is also one of great volatility, bogged down by a history of missed manufacturing deadlines, controversial market-moving comments by company founder Elon Musk and a steady stream of traders ready, willing and able to short Tesla stock. In fact, many Wall Street experts are bearish on Tesla stock.
That's borne itself out in 2019's returns, with shares off nearly 30% year-to-date.
TSLA Stock at a Glance
TSLA is trading around $245 per share, down 35% from 52-week highs. The seemingly neverending escalation of the China trade war hurt business, and Tesla's Q2 earnings report in July also came up a dud as the company missed on revenue and posted larger-than-expected losses. TSLA stock fell 10% on the news.
After sluggish plant production growth in 2018, Tesla's Model 3 sedans are moving off production. Last year, company executives said that if TSLA could consistently manufacture 5,000 Model 3s per week, Tesla executives expected gross margins to rise, moderately at first, but by 25% in 2019, which should result in an upswing for TSLA stock.
The results are now in, and while Telsa produced over 5,500 Model 3s per week in the second quarter, that 25% gross margin execs projected never happened. In fact, gross margins fell year-over-year, from 15.5% to 14.5%.
Pros to Buying TSLA Stock
It's hard not to get excited about a company like Tesla. Musk is a visionary CEO who is on a mission to make sleek, affordable electric cars available to the general population. He has legions of admirers and his Twitter ( TWTR) feed is a must-read for automotive enthusiasts and investing professionals alike.
With a market capitalization of $43 billion, Tesla is bigger than the Detroit automaker Ford ($34 billion). And needless to say, when it comes to growth prospects, Tesla has Ford, General Motors ( GM) Toyota Motor Co. ( TM) and practically all the major players smoked.
Musk dreams big and then acts on his impulses. He owns SpaceX, which makes rockets and rocket engines, and has the stated goal of reducing the cost of spaceflight and sending humans to Mars. He wowed the market last fall by unveiling the sporty Tesla roadster, and then made more headlines months later by launching one on a SpaceX rocket and sending photos back to Earth of an astronaut suit seated behind the wheel as the red sports car floated in space.
Musk also is working on a high-speed transportation system called Hyperloop that he says could connect Los Angeles to San Francisco, and could connect New York to Washington, D.C. He was granted a permit last year by the District of Columbia to begin digging on the northeastern side of the city. His Boring Company in 2018 made more waves by selling $500 flamethrowers to the general public -- another venture promoted by Musk on his Twitter feed -- to raise $10 million.
Cons to Buying TSLA Stock
Many stock experts are not enthusiastic about Tesla stock moving forward. Tesla has not yet turned an annual profit, and stock experts are concerned that TSLA stock has been inflated by production expectations that Musk and the company haven't been able fulfill.
Erik Gordon, professor at the Ross School of Business at the University of Michigan, says investors have to be "brave or delusional" to buy TSLA stock. "The company seems like an operational mess," he says. "Promised deadlines are missed. Manufacturing problems persist. Employees come and go. Things are bad enough that Musk suspects sabotage. It is a high-risk stock, and given the stock's price, it's not clear how high the reward can be."
Investors also say it's hard to get a good handle on exactly where Tesla stands, performance-wise. Just a year ago, Musk was famously sleeping on a Tesla factory floor and erected a makeshift production tent in a parking lot to increase June production numbers. Reports circulated that Musk ordered mandatory weekend shifts and pulled workers from other Tesla production lines to hit his long-awaited production goal of making 5,000 Tesla Model 3s in a week.
But even as Musk publicly basked in that achievement a year ago, Tesla stock fell because investors and analysts didn't believe Tesla could easily sustain those numbers.
"Tesla is the most dramatic company in the business," says Tom Nardone, a former Ford Motor executive and CEO at PriveCo Inc. "Elon Musk says a bunch of stuff which seem to indicate one thing, and then the quarterlies, which are legal documents filed with the U.S. Securities and Exchange Commission, say something completely different. He doesn't outright lie, but his statements are as humanly close to a lie as possible."
Nardone says that Tesla is "so far behind" in manufacturing the Model 3 that it is a wonder the stock hasn't completely tanked. "The only explanation I can find for why the stock hasn't cratered is that people that do own the stock have fallen under his charismatic spell and they believe what he is saying and even extrapolate from his words things that he hasn't said," he says. "It is almost a cult."
The Bottom Line on TSLA Stock
Experts also say that Tesla is about to face increased competition in the luxury car market and that won't help the company stock either.
"That's coming from companies who are ramping up their spending on research and development in the space, and who also happen to already be more efficient in making cars," says Asad Gourani, founder & CEO at AG Wealth Management, in Ann Arbor, Michigan. "Also, valuation-wise, there seems to be a disconnect between the stock price and the fundamentals of the company," Gourani says. GM is currently the most valuable American automaker, with a valuation of $48 billion, only $5 billion more than Tesla's valuation. "Yet the company sells only a fraction of the cars that GM sells," Gourani says.
"It's hard to make an argument that the stock isn't already priced to a best-case scenario at these levels," he says.
More From US News & World Report