Why Should People Invest In Your Stock

WHY SHOULD PEOPLE INVEST IN TESLA STOCK?
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Tesla
1 Investment case
Tesla was incorporated in 2003, and it was primarily envisioned to mass produce practical electric cars for the mass market. Over the years the company has evolved, and today It is involved in other sectors, i.e. Energy. Today, Tesla designs develop, manufactures and sells fully electric vehicles. It also produces, installs and provides energy solutions to companies, governments and small-scale users such as businesses and homeowners through its energy division. The company is headed by one of its founders, Elon Musk and it was floated in a NASDAQ on June 29, 2010, where it offered 13.3 million shares at $17, and it managed to raise $226.1 million. Currently, (in the last one week) Tesla stock price is averaging 350 per share and has a market cap of over $61 billion making it America’s most valuable car maker.
Tesla has an energy division which produces electrical energy products and offers related services. Thus, Tesla is also involved in the installation, operation, maintenance of solar storage products. One of the key products it has in the energy solution division is the Powerwall which was envisioned to provide storage of energy for small businesses and homes and takes advantage of electricity rates to maximize value for the user. It also produces, sells and installs solar systems which came on board when Tesla acquired SolarCity and the company also has a strategic partnership with Panasonic in the energy division. 01508125
The car division which is the often-known part of the company has been experiencing challenges, but it has developed in recent years in car production capacity and diversity of cars it produces. The company had bottlenecks in meeting production targets earlier in 2018 owing to ‘excessive automation,’ but in the second quarter, it started producing over 5000 model 3 cars per week as promised by the CEO. It was a great milestone as Model 3 car model is meant for the mass market and it has many preorders that the company has to meet. Over the years, the company has expanded the diversity of car model it offered. Today, Tesla offers model 3 which is meant for the mass market, model S sedan which high a luxury sedan. It also produces model x Sports Utility Vehicle (SUV) and Roadster which is a sports vehicle. Tesla has also promised to produce model Y and Tesla semi-trucks and Tesla pick-ups.
Tesla has also been building infrastructure for its products especially the cars. It has thousands of ‘supercharger’ stations all over the country and in other continents. The company has also been building what they refer to as ‘Gigafactory,’ and the first one is near completion in Nevada. The company has scouted, and it is building other giga-factories in other places. Already two giga-factories are being built in Buffalo in New York, and Shanghai China and the company plans to build another one in Europe. Giga-factories are gigantic factories which seek to ensure the company has vertical integration of its products and build everything that goes into its products in-house to reduce the cost of production and maximize profits.
However, the company has broken many barriers since its incorporation. It has evolved to be an energy cum car company as it sought to vertically integrate its products. It has been successful, and it is likely to become profitable soon which is likely to shoot its share prices. The company is still innovative, and though it is experiencing teething problems of some technologies, it has a promising future. The company is in its growth phase, and a strong buy is advised but for the long term.
2 Sector outlook
Tesla is unique in that it is a car manufacturer and an energy company. Thus, for sector outlook, it fits in both industries, but this analysis will gravitate to information on Tesla cars which is the main division of the company and largely depends its profitability and stock prices. At the moment, there is no other company that deals with energy and car manufacturing business. Thus, a comprehensive sector outlook will necessitate casting a wider net to encompass car manufacturing companies such as GM, Form Motors, Fiat, Toyota, etc. And companies dealing with solar products and energy storage such as Vivint Solar Inc., Sunrun Inc., Trinity Solar. The company is still in the growth phase & expansion, and it is plagued by may problems. It has been delivering most of its products late after it had promised to deliver which is often reflected in its erratic stock prices. At the moment it is still struggling to meet a production target of its model 3 cars. It has also been very aggressive in expansion trying to have vertical integration of its production. Thus, the company has taken several loans which it is servicing while it burns through its cash reserves. Severally, the CEO has had to assure investors that the company is performing well when rumors of its cash position take to the media and hurt its stock prices. The CEO has promised that the company would be profitable soon as its mass-market vehicle assembly line has been ramped to meet production target. In the energy division, it is aggressively developing new technologies such better battery design to improve energy density and enable the cars to have a longer range. The company was profitable in 2018 third quarter, and the CEO promised the company would become sustainably profitable since it had solved many bottlenecks in its production.
Return analysis
left167132000The company has been on a bull market in the last 8 years since it was floated in NASDAQ. It was floated with $17 a share, and in December it is averaging over $350. The share price had risen nearly 2000% since when it went public. Additionally, in the last three months since when the CEO announced that the company was profitable and promised profitability consistency, the share prices have risen from $264 in 1st Sep 2018 to a high of $366 on 4th December 2018. That’s nearly 114% increase in the last three months.
The bull momentum is likely to continue since the volatility of its stock price was mainly caused by the uncertainty of the production targets the company had and when it was likely to become profitable. In the recent past, it has shown strong bull momentum as investors show their trust in the company since it seems to have ironed out the major issues it has had over the year; notably, model 3 production target of at least 5000 cars per week and profitability.
Comparative analysis
One of the main Tesla competitors is Ford Motors and GM. These two companies have been on a bear market in the last few years. Ford has been on a bear market since 2014. Ford has lost 38% since January 2018. Its stock price peaked at $13 in January, but in December 2018 it is oscillating at around $9. GM has been on a bear market for the whole year. It is also experiencing slow sales especially with some of its products. Recently it announced that it would be closing 5 of its plants in Michigan, Ohio, Maryland, and Canada and lay off 15% of its salaried workers.
At the moment, Tesla has produced 80,142 vehicles in 2018 Q3, 50% more than our prior all-time high in Q2. The Q3 deliveries totaled 83,500 vehicles and for the mass market Model 3 deliveries, the company delivered twice as many Model 3 cars that previous quarters combined. Though the company is struggling with deliveries since its bypassed dealership to directly deal with its clients, it is evident that the company is en route to sustainable profitability and sustained achievement of its production targets.
Though Ford Motors and GM sell more cars by volume and hence have higher revenue, their revenue has plateaued in the recent decade whilst Tesla sales are increasing exponentially as the company streamlines its production lines. 1905018415
left190500General motor shave been having a similar problem such as Ford. Their sales revenue albeit higher than Tesla have plateaued. GM has also shut down several of its plants in North America due to slow sales of some of its car makes and model which may further affect its sales revenues.
Tesla is undersupplying the market with its products, and it is still serving the pre-ordered customers. It is likely that Tesla sales will increase in the coming years because the company’s products are undersupplied. 0116713000
The only probable area where the other companies in the industry have beat tesla is in PE ratio. Tesla has never posted a positive PE ratio but maybe because of its aggressive expansion to dominate car ...