Tesla (TSLA 4.51%) is one of the world's most well-known and popular companies. A big driver of its popularity is the presence of charismatic and controversial co-founder and CEO Elon Musk.
The visionary Musk, who also leads SpaceX and Twitter, among other companies, created Tesla with one ambitious goal: to accelerate the advent of sustainable transport by bringing compelling mass-market electric cars to market as soon as possible.
Musk has certainly succeeded with that mission. Tesla produced almost 1.4 million electric vehicles (EVs) in 2022, including about 1.3 million Model 3 cars designed for the mass market. In addition to producing EVs, Tesla develops, manufactures, and installs solar energy systems (Solar City), battery storage systems (Powerwall), and EV charging infrastructure (Superchargers). It has also developed other technologies, including autopilot and self-driving features.
The company is as ambitious as ever. Tesla unveiled its Master Plan 3 at its Investor Day in early 2023. The company aims to help lead the planet to sustainability. A key aspect of that strategy is to ramp up its production to 20 million EVs annually by 2030. The company plans to build more gigafactories to manufacture its EVs, battery storage systems, and other sustainable energy products.
These investments should help drive the company's revenue and profits, giving the stock the power to soar and making Tesla a compelling stock for investors to buy. Here's a step-by-step guide on how to buy Tesla's stock and some things to consider before purchasing shares.
How to buy
How to buy Tesla stock
To buy shares of Tesla, you must have a brokerage account. If you need to open one, here are some of the best-rated brokers and trading platforms. This step-by-step guide will show how to buy Tesla stock using the five-star-rated platform Fidelity.
Fidelity makes it easy to buy stocks. Its website offers a . Here's a screenshot showing how to place a stock trade with Fidelity:
- The number of shares you want to buy or the amount you want to invest to purchase fractional shares.
- The ticker symbol (TSLA for Tesla).
- Whether you want to place a limit order or a market order. The Motley Fool recommends using a market order because it guarantees you buy shares immediately at that market price.
Should I invest?
Should I invest in Tesla?
Before buying shares in Tesla, you need to decide whether you should invest in Tesla stock. Here are some reasons to consider investing in Tesla:- You want to invest in a company driven to accelerate the adoption of sustainable energy.
- You understand the risks of investing in Tesla, including the possibility that shares could lose value.
- You've thoroughly researched Tesla and understand how it makes money.
- You believe Tesla's strategy will increase its revenue and earnings at an above-average rate over the long term.
- You want to invest directly in stocks and have the time to follow the company.
- You don't need to earn dividend income.
- You are confident that Elon Musk can lead Tesla and handle all his other responsibilities.
- You plan to hold shares for the long term and ride out any near-term volatility.
- You think that more auto companies will follow Ford (F 0.29%), GM (GM 1.37%), and Rivian (NASDAQ:RIVN) in adopting Tesla's supercharging network, becoming a growth driver for the company.
- You need the money you plan to invest in Tesla stock to cover emergencies or for a major planned purchase within the next three to five years.
- You're concerned about the company's valuation.
- You're worried about the economy, your job, health issues within your family, or other pressing matters.
- You have yet to research Tesla and need to know what it does and how it makes money.
- You don't have the time to invest directly in stocks and follow Tesla.
- You're near retirement and need dividend income.
- You're concerned about the risk that shares could lose value.
- Elon Musk's values don't align with yours.
- You don't think other automakers' growing adoption of Tesla's supercharger network will be a profit driver.
Profitability
Is Tesla profitable?
Earnings growth is one of the key drivers of a company's stock price over the long term. After years of posting losses, Tesla finally turned the corner on profitability in 2020.The company's profits have surged over the last two years. They more than doubled in 2022, reaching a record $12.6 billion.
Tesla is also free-cash-flow positive. The company produced $14.7 billion of operating cash flow in 2022 and $7.6 billion of free cash flow. That helped grow the company's cash and investments balance to $22.2 billion against only about $3.1 billion of debt and finance leases, putting Tesla in a strong financial position.
Tesla's rapidly rising profits should help power its stock over the long term. If the company can continue growing earnings at an above-average rate, the share price should gain value in the coming years. However, shares could crash in value if Tesla hits an earnings growth speed bump.Dividends
Does Tesla pay a dividend?
As of mid-2023, Tesla does not make dividend payments to its shareholders. The company retains 100% of its earnings and cash flow to reinvest in growing the business and its cash balance.
Tesla is investing heavily to build additional gigafactories and expand its production capacity. In 2023, it unveiled an additional $3.6 billion investment to continue the expansion of Gigafactory Nevada. The company also plans to invest more than $5 billion in building a new gigafactory in Mexico.Given the company's continued heavy investments in expansion, it likely won't start paying dividends anytime soon. It's not an ideal stock for those who need to earn passive income for retirement.
ETF Options
ETFs with exposure to Tesla
Instead of actively buying shares directly, you can passively invest in Tesla by investing in a fund holding its stock. Tesla is one of the largest publicly traded companies by market capitalization and is a widely held stock.
Tesla is in several stock market indexes, including the S&P 500 Index and Nasdaq Composite Index. As a result, index funds and exchange-traded funds (ETFs) that benchmark their returns against those indexes hold Tesla stock.
| Exchanged-Traded Fund | Assets Under Management | Tesla Shares Held | Fund Weighting | Position Ranking |
|---|---|---|---|---|
| Invesco QQQ Trust (NYSEMKT:QQQ) | $203.4 billion | 33.0 million | 4.6% | Fifth-largest |
| SPDR S&P 500 ETF Trust (NYSEMKT:SPY) | $425.2 billion | 30.7 million | 2.0% | Fifth-largest |
| iShares Core S&P 500 (NYSEMKT:IVV) | $336.1 billion | 24.3 million | 2.0% | Fifth-largest |
| Vanguard S&P 500 ETF (NYSEMKT:VOO) | $326.1 billion | 22.9 million | 1.6% | Ninth-largest |
| Vanguard Total Stock Market ETF (NYSEMKT:VTI) | $310.9 billion | 18.3 million | 1.3% | Ninth-largest |
The Invesco QQQ Trust holds the most shares, almost 32 million, and has the highest fund weighting to Tesla among the large ETFs. However, several smaller ETFs have a greater weighting to Tesla. Among the most notable are the Consumer Discretionary Select Sector SPDR Fund (XLY 0.58%) and Cathie Wood's ARKK Innovation ETF (ARKK 2.75%).
The Consumer Discretionary Select SPDR ETF, which has $17.4 billion of assets under management, has a 21% weighting to Tesla. Meanwhile, the ARK Innovation ETF has $8.1 billion in assets under management and a 12% weighting to Tesla. Given their higher weightings, the ETFs are potential options for investors who want higher exposure to Tesla stock without directly owning shares.Exchange-Traded Fund (ETF)
Stock Splits
Will Tesla stock split?
As of mid-2023, Tesla did not have an upcoming stock split. However, the company has completed two stock splits in its history as a public company:
| Type of Stock Split | Date | Pre-Split Price |
|---|---|---|
| 5-for-1 | August 2020 | Around $2,200 per share |
| 3-for-1 | August 2022 | Around $900 per share |
Related investing topics
The bottom line on investing in Tesla stock
Tesla is one of the most innovative companies in the world. It has a charismatic and controversial leader driving the company toward an ambitious mission. If successful, Tesla's stock price could ride higher, enriching its shareholders in the process.Many people want to invest in Tesla stock. It's easy to buy shares. However, before you do, make sure you want to invest in Tesla stock. It might not be for everyone.
FAQs
FAQs on Tesla
Does Tesla use AI?
Tesla is among the growing number of companies using artificial intelligence (AI). The company uses AI to improve its autonomous driving capabilities, among other things.
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