There is more to buying stock than just owning a stake in a company. It is more like having faith and confidence in its future success. This holds true for Tesla Motors with the CEO of the company, Elon Musk, steering it daily into new waters. Many investors in Tesla stock believe that buying TSLA stock is buying into a greener, cleaner future with solar power and clean energy. However, Tesla shares have risen and fallen with regularity during the past couple of years since convincing the public that owning an electric car is convenient, feasible and a cost-efficient mode of transportation.
Pegged as a high-risk high-reward stock by many, it remains, however, a start-up company with many questioning whether the transformative potential of the company will ever be translated into dividends and earnings. The future of these innovative cars remains exciting but difficult to predict, and investors in Tesla options should temper their expectations with caution as some variables could jeopardize future earnings. Some things investors need to know before taking the plunge are:
– Most Tesla cars were made to order for wealthy or future-focused customers, and the company reported a loss more than $46 million during Q2 in 2015. Tesla cars are currently too expensive for the regular consumer with a price tag ranging between $70,000 and $110,000 even though there are plans to produce more affordable versions
– TSLA may run out of batteries to power Tesla cars, even with the world-renowned 10 million sq.ft. “giga-factory” projected to solve the problem by employing 6,500 people. Rumor has it that several giga-factories will be needed to handle the demand for batteries and it will take an incredible amount of CapEx to keep the company fully operational and its shareholders happy.
– Declining gas prices may make it more economically attractive to drive gasoline-powered vehicles relative to driving Tesla cars. With increased petroleum supplies, production of fuel-efficient internal-combustion engines far outweighs production a decade ago and keeps on growing.
– Increased competition from other electric vehicles production companies such as Chevrolet and Nissan, as well as plans by BMW, Mercedes Benz, and Volkswagen to enter the market within the next few years, it may become very crowded as they vie for Tesla’s market share.
Lastly, it is believed that TSLA may never recoup the massive CapEx the company has spent on an infant industry that has been paved with failed start-ups. Billions in capital expenditure have already been devoted to the development of the new Model 3 and Model X versions, apart from the hefty price tag for the battery factory. It is said that with any new product innovators come first and then the imitators arrive, and other companies may well capitalize on Tesla’s initial creation by just repackaging the product and start making money immediately.
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