If I Invest $1000 in Tesla Today, How Much Can I Earn?
The American company Tesla was one of the first manufacturers of electric cars. Now it is a leader in this industry. The total capitalization of the enterprise is more than a trillion US dollars. Therefore, many people want to buy Tesla shares and make money from them. Before buying, investors should study the financial performance of the company, analyze all possible development prospects and risks.
If I invest $1000 in Tesla today, how much can I earn? To answer this question, we need to look into history.
Tesla Motors is an international corporation founded in 2003 by M. Tarpenning and M. Eberhard. Since Elon Musk took it over in 2008, Tesla has become a major growth driver in electric vehicle development. In 2010, Tesla shares were listed on the NASDAQ.
To realize his ambitions to rebuild the automotive world, Musk even had to go into debt. For a while, the financial viability of Tesla Motors was in question. Ultimately, the company was able to strengthen its position and became a coveted prey for investors. To understand whether and how to buy Tesla stocks, it is worth carefully analyzing the company's current business model.
What was the stock price at the dawn of Tesla Motors? It's hard to believe, but the first shares of Tesla could be purchased for as little as $3.84. Such a low price is explained by the fact that the company did not produce anything, but was engaged exclusively in development. After the release of the first production car in 2012, quotes almost doubled. Later, securities continued to show enviable growth rates, when Model S, Model 3 and Model Y entered the market one by one.
Analysts share different forecasts for the value of Tesla shares in the next 3-4 years. There’s an opinion that by 2025, it will be possible to buy securities of Elon Musk's company for $3,000 apiece. However, on the way to Olympus, it may face a number of serious difficulties. Therefore, until 2024, shares will trade at $1,400 or even less. So say the experts who put Tesla Inc. on a par with such giants of the high-tech market as Apple, Microsoft and Amazon. However, there are fundamental factors that could undermine Tesla's stability and hinder its ambitious plans.
Investment firm Ark Investment Management predicts Tesla shares to rise to $4,000. If this happens, the capitalization of Elon Musk's company will be about $3 trillion. In the best-case scenario, Tesla electric cars will drop to $36,000 by 2025. The biggest spike came in 2020, when shares priced at $80 a share were trading at $880.
Tesla Motors has pioneered the electric car industry. However, every year it has more and more competitors. They make high-quality electric vehicles, sell them cheaper, give a guarantee and provide comprehensive support. Healthy competition encourages moving forward, but in the case of Tesla, the prospects for development may not be the most rosy.
For example, by 2025, Volkswagen's investment in the development of the electric vehicle segment could reach $85 billion, and Ford, in tandem with GM, could reach $30 billion.
And now the question is: if the German and Japanese automakers manage to move Tesla off the honorary pedestal, what can happen to the assets of investors? That's right, they will greatly lose in value. Therefore, even taking into account the most optimistic forecasts, you need to keep abreast and monitor the situation on the securities market.
If Tesla manages to implement a robotic taxi service involving electric vehicles, the corporation's operating profit will increase by $ 20 billion by 2025. The probability of such a scenario is 50%, according to ARK Investment Management.
Thus, analysts have no consensus on what will happen to Tesla shares in 2022, 2023 and 2025. On the one hand, we are dealing with a recognized leader in the electric vehicle industry, which introduces new technologies and never ceases to amaze even skeptics. On the other hand, with the growth of competition, Elon Musk's company is waiting for not the easiest times.
So that each investor can adjust the forecast and draw their own conclusions, we list a few more factors that can affect the value of Tesla Motors shares:
The state of the US economy. Today, the global and, in particular, the American economy is in a “suspended” state caused by the coronavirus pandemic. However, sooner or later demand for novelties in the automotive market will increase. This means that Tesla Motors will receive additional profit, its quotes will grow.
Due to government measures to curb the spread of Covid-19, Elon Musk had to close a car factory in Shanghai for two weeks. Later, the American entrepreneur faced even more severe restrictions in the US and called them "unconstitutional".
The development of the automotive industry. If the vector of auto giants turns towards electric cars, Elon Musk will have to look for a plan B. It is possible that BMW, Honda and other automakers will be able to create models that are far superior to Tesla cars in both price and reliability. This means Tesla's stock prices will go down.
New discoveries and developments in the field of alternative energy. First of all, we are talking about the emergence of new sources of energy storage. Whoever makes the discovery first will get a significant advantage. The "Achilles heel" of all Tesla Motors electric vehicles is long-term charging. The main trump card will be the one that is able to charge electric vehicles much faster. For example, in 20-30 minutes.
Tastes and attitudes of consumers. Perhaps the most unpredictable factor. Today you may like BMW, but tomorrow you will buy Audi. If the opinion about the importance of protecting the environment prevails in society, this only plays into the hands of Tesla.
Of course, the future of Tesla Motors and the value of its shares will depend on Elon Musk himself. Sometimes his statements seem too strange and extravagant, sometimes they hit the bull's-eye. Small investors may be inspired by the ambitious plans of the American entrepreneur, while large institutional funds are unlikely to react to market news. But the main capital is precisely with them.
After a phenomenal success in 2020, the share price began to decline and reached $580. That is, almost 30% cheaper than at the beginning of 2021. Most analysts agree that this is a normal practice – after a rapid growth, there is always a price adjustment in the investment market. Anyone who manages to buy shares at a catchy price, starts to close positions and “harvest”. The market takes a step back, accompanied by a decline in quotes. Ultimately, this attracts new investors, and Tesla Motors shares may rise in price again.
Without a doubt, Tesla Motors is one of the most incredible companies that has made a real breakthrough in the technology market. Today, most analysts believe that Tesla shares will rise in price and break through the $3,000 ceiling by 2025. However, none of the experts gives a 100% guarantee that it will be able to maintain its leadership in the electric vehicle market. There are other fundamental factors to consider when making a final forecast: competition, the Covid-19 pandemic, consumer tastes.
The volume of cars produced is steadily increasing. In 2019, 367.2 thousand electric cars were rolled off the assembly line, and in 2021 – almost 936,000 cars. According to the results of the last year, penetration into the American automobile market is estimated at 2.35%, and the share of the manufacturer in China and Europe is one and a half percent. At the end of 2021, Tesla's revenue was $17.71 billion, which is higher than planned. Gross and operating margins showed growth, the volume of which was 27.4 and 14.7 percent, respectively.
This allows you to make positive forecasts for Tesla shares in the medium term. In 2022, the company continues to produce two models of a sedan and a crossover. The most popular electric car among all buyers is the Tesla Model 3, its sales account for more than a third of the total production volume. At the same time, the time for the delivery of cars was reduced by 64%, but the power of installed solar panels on electric cars decreased by 1%.
The possible increase in the value of the share may range from 20 to 600%. Tesla is a very volatile issuer whose securities can go up and down significantly in a short period of time. This is the main risk. Among other negative aspects, it is worth highlighting reputational costs and the development of competitors, which increase their production capacity every year.
Factors that positively affect the value of Tesla shares are:
- plans to increase production; the possibility of splitting shares, which will make them more accessible to private investors;
- creation of its own ecosystem, which can also have a positive impact on the demand for securities.
Thus, only after a detailed analysis of Tesla shares can decisions be made to buy or sell securities. At the same time, the view of financial analysts on Tesla in the medium term is cautious, and in the long term it is moderately positive.
According to Bloomberg, Musk's net worth has decreased by $100.5 billion this year, more than other people in the Billionaires Index. At the same time, the entrepreneur is still the richest person on the planet and owns $169.8 billion. Tesla shares are down 52% this year, while the Nasdaq 100 industry index is down only 29%.
Musk's "impoverishment" is directly related to the decline in the value of Tesla shares, since most of his fortune is represented by Tesla securities. Automaker’s shares are falling amid investor fears that Musk is too carried away by Twitter and does not pay enough attention to Tesla, although competition in the electric car market is only intensifying.
Tesla Inc. shares are attractive for investments in the short term, analysts at Freedom Finance Global believe and recommend buying the company's securities with a target price of $176 per share over a two-month horizon, the investment company said in a comment.
The decline in Tesla's capitalization will continue in 2023, Fundstrat analysts say. The “extreme” scenario calls for a collapse in the electric car maker’s stock by more than 40% from current levels.
Fundstrat analyst Mark Newton predicted a fall in Tesla shares in 2023. According to an expert from an analytical company, Tesla shares could fall to at least $165, that is, by about 11% from current levels, and in the event of an “extreme” scenario, the shares could fall in price to $109 per share, which means a decrease of about 42%.