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Tesla regularly receives recognition for high brand loyalty thanks to its cult-like customers. The company’s fanbase goes beyond the people who own its fleet of electric vehicles — there’s another group devoted to Tesla's stock and its high-profile CEO, Elon Musk.
Austin, Texas-based Tesla launched its initial public offering (IPO) in 2010, when shares of the company began trading at $17. Since then, the stock’s price has multiplied. In 2020, Tesla shares surpassed $2,200 and that August, the company announced its first-ever stock split (a five-for-one split), which brought the price down to about $400. But it took less than six months for the stock’s price to double once again.
In March 2022, the company announced plans to request stockholder approval for an increase in its number of shares at Tesla's upcoming annual meeting, which would enable the automaker to split its stock again. That three-for-one split took place in August.
Like many major companies over the past year, Tesla’s stock has struggled amid a bear market that has hit the tech sector especially hard. Those struggles were compounded by Musk’s high-profile takeover of Twitter, which investors criticized. Musk sold billions of dollars worth of Tesla stock to help finance that deal. As of March 2023, the stock was trading at $196 per share — a 46% drop from a year earlier.
Tesla's stock can be a wild ride, so here’s how to evaluate if it deserves a spot in your portfolio.
Tesla stock (TSLA) fundamentals
To many consumers, Tesla Inc. is synonymous with electric cars and the broader clean energy movement. On Wall Street, Tesla's stock is often among the most actively traded stocks, with millions of shares changing hands each day. The stock is listed on the Nasdaq stock exchange under the ticker: TSLA.
In December 2020, Tesla joined the S&P 500, debuting as the then-fifth largest member and largest ever entry for this key stock index. Tesla is also in the tech-heavy Nasdaq 100 index. The carmaker is classified in the consumer discretionary sector and grouped alongside other consumer-focused companies like restaurants or retailers.
To understand whether Tesla's stock is a good investment, you’ll need to dive into the company’s financials. In its quarterly and annual earnings reports — which it shares on its website and files with the U.S. Securities and Exchange Commission (SEC) — you will find Tesla's balance sheet, income statement, and details about various lines of business.
You’ll also want to research the stock itself. On financial websites, you can find Tesla's historical performance and key metrics like its price-to-earnings ratio or earnings per share. Finally, you can read reports written by Wall Street analysts about the company, its valuation, competitors, the broader industry, and trends that might affect its stock price.
Tesla's latest financial results
Wall Street has lofty expectations for Tesla. In the fourth quarter of 2022, Tesla earned even more than analysts predicted it would. Tesla reported record revenues of $24.3 billion and a record profit of $3.69 billion, or $1.19 per share — a bump of nearly 60% over profit in the same period in 2021.
Tesla's revenue growth came despite waning demand in the auto market and lingering supply chain issues from 2022.
Earlier this year, the electric carmaker enacted price cuts it said were necessary to bolster demand amid high inflation and tight consumer budgets. It reduced prices for some models again in March. This spring, investors will be watching closely to see whether the cuts boost demand and Tesla sales — or put a dent in the company's profits.
Meanwhile, there's been a lot of enthusiasm around Tesla's investment of $3.6 billion in two new factories in Nevada. One factory will produce battery cells and the other will produce the company's long-awaiting all-electric Semi truck.
How Tesla stock fits into your portfolio
You may own Tesla stock without realizing it, particularly if your stock portfolio includes any index funds that track the S&P 500 or the Nasdaq 100. What’s more, Tesla stock is included in the holdings of more than 200 different exchange-traded funds (ETFs).
In fact, investing in Tesla may be best accomplished by buying a mutual fund or ETF that invests in this stock. That way, you can benefit from Tesla's gains (along with a broader swath of companies), ensure your portfolio is diversified (thanks to a mix of various stocks), and avoid risks associated with investing in individual stocks.
Investing in Tesla isn’t for the faint of heart; its stock is almost twice as volatile as the S&P 500, and buyers hoping for a repeat of Tesla's past performance could be disappointed. As a more mature company, it may not experience the same gains ahead and the stock has endured some pretty significant bumps along the way. Double-digit declines aren’t exactly rare, and this stock has plummeted as much as 21% in a single day.
Finally, CEO Elon Musk has proven he’s capable of moving the stock’s price with a single tweet. In February 2021, Musk said the company had invested $1.5 billion in bitcoin and might accept the cryptocurrency as payment for vehicles, only to change his mind a few months later, citing the large energy use of bitcoin mining operations.
How to buy Tesla in a brokerage account
There is no “right” amount of money to invest in the stock market. That said, you want to avoid a decision that proves to be “wrong” for your investment goals.
Deciding if buying Tesla stock makes sense for you will likely depend on whether you already have a well-diversified portfolio, or if you’re just starting out with investing. Before you invest in the stock market, experts advise that you set aside at least three months worth of expenses in an emergency fund and pay down high interest debt (like credit cards).
If you are new to investing, start by buying index funds and building a diversified portfolio that includes stocks, bonds, mutual funds, ETFs and alternative assets. Because individual stocks often are more volatile than the overall market, you should limit your exposure to any one stock.
Finally, remember that even the hottest stocks can go cold. Rather than focusing on finding the market’s winners, a proven strategy is to invest in the market itself — and ride out the ups and downs over a long period of time.