How to Buy Tesla Stock in 2022
Tesla has been one of the most popular US stocks in the two years to 2021. The company had a trailblazing 2020, with its share price gaining over 700%. The high momentum in the stock may have been driven by the influx of retail traders seduced by the company's disruptive technology, which made it appealing to investors looking for a value or growth stock (or both).
This guide is for anyone looking to buy Tesla stock.
Learn How to Buy Tesla Stocks in 3 Easy Steps
Find a Broker
First, you need to open a share trading account with an online stockbroker. Tesla stock can be traded through any online stockbroker with access to the Nasdaq exchange or any other stock exchange where the stock is listed, but you should look for a broker that is regulated and charges low commission fees.
Analyse the Tesla Stock Price Chart
Once you’ve read our guide and conducted your own fundamental analysis to determine if Tesla is a sound company to invest in, the next step is to analyze its price chart to determine the best time to buy the stock. You may want to buy on a dip or breakout; your chart analysis will tell you the best level to buy at.
When your analysis tells you it’s a good time to buy, specify your trade size and place your buy order. You can use a market order (which buys the stock at the market price) or a limit order (which buys at your specified price when the stock falls to that level). Be sure to have a trading plan before making a trade.
Tesla Company Overview
Many people think of Tesla Inc. as an electric vehicle manufacturing company, but that is just one segment of the technology company; the second is its energy generation and storage unit. The automotive segment designs and manufactures electric vehicles and also sells automotive regulatory credits. The energy generation and storage segment focuses on battery energy storage products, manufacturing and installation of solar panels, and other related products and services.
Of course, the company is famed for its electric cars, which are ranked the best in the world. Tesla controls 16% of the EV market space and 23% of the battery segment space as of 2021. Global vehicle sales for Tesla in 2020 increased by 35.8% on an annualized basis to 499,550 units. In 2020, the company surpassed the 1 million mark for electric cars produced. Tesla's Model 3, which was launched in 2015, is the world's all-time best-selling plug-in electric car, with more than 800,000 being delivered by December 2020.
Tesla Business Model and Revenue Streams
Tesla has two segments through which it generates revenue: the automotive segment and the energy generation segment. On the surface, the company’s revenue sources may seem diversified, but in reality, only the automotive segment has been profitable.
The automotive segment contributes about 80% of revenue and almost 100% of gross profit. Revenue from the automotive segment comes from multiple streams, including new vehicle deliveries, the use of Superchargers, and the sale of regulatory credits.
The revenue from the energy segment comes from the sale, leasing, and installation of solar energy generation and storage products, and other related services to residential, commercial, and industrial customers.
Tesla posted its first annual profit in its 2020 fiscal year (FY), which ended December 31, 2020. It was a significant milestone for the electric vehicle maker after reporting a loss in each of the last five years.
In the last six years, sales in the automotive segment have been explosive, reaching as much as $26 billion on an annualized basis in Q4 2020. The segment posted a gross profit of $6.6 billion in FY 2020, up 70.5% compared to the previous year. Revenue rose 28.2% to $29.5 billion.
While there has been an increase in revenue from the energy storage segment, this still pales in comparison to the revenues being generated by the automotive sector. The energy generation and storage segment posted a gross profit of $18 million in FY 2020, down 90.5% compared to the previous year. On the other hand, revenue for the segment rose 30.2% to $2.0 billion in the 2020 FY.
In fact, given the company's growth trajectory and outlook, the automotive segment should continue to be the main source of income for Tesla.
History of Tesla
Tesla was founded in 2003 by two engineers: Martin Eberhard (who served as its CEO) and Marc Tarpenning (who served as the CFO). The company was named after the 19th century inventor Nikola Tesla, who is best known for his work on AC electric current.
Tesla was created to develop and produce a fully electric car, partly inspired by the favorable reaction received by General Motors’s electric car experiment, the EV1. GM ran an electric car program between 1996 and 1999, producing a limited number of cars that were never released for public purchase. The test was generally considered successful from an engineering standpoint.
Musk joined Tesla in 2004, becoming the chairman of its Board of Directors after he invested $30 million into the company. In 2008, Tesla launched the Roadster, which was the first entirely electric car that could arguably meet consumer needs.
In October 2008, Musk took over as CEO of the company after a leadership tussle that saw Eberhard and Tarpenning being forced out of the company they founded. This resulted in a lawsuit against Musk and Tesla, which was dropped later that year.
Tesla brought down the cost of its Model S sedan by 25% in 2008, and in 2009, the company experienced severe financial difficulties, which made it sell 10% of its stake (or $50 million worth) to Daimler AG (DDAIF) and borrow another $465 million from the Department of Energy. The company’s need for short-term capital, including high borrowing costs, made it go public in 2011 under the ticker TSLA. The stock opened at $17 a share, and the company raised $226 million from the IPO.
In 2012, Tesla opened its first charging stations, called Superchargers, which offered free charging to Tesla owners at faster rates than common wall outlets. Tesla announced its Gigafactory in Nevada in 2014, after it posted its first quarterly profit a year earlier. The Gigafactory makes the batteries that power its devices; it is considered crucial to its entire business model as it reduces the cost of production and vertically integrates battery production into the operations of Tesla.
It was in 2015 that Tesla introduced a new line of solar energy products designed to power homes and businesses through rechargeable batteries. Then, in 2017, the company changed its name from "Tesla Motors" to "Tesla Inc." to reflect the full scope of its products, reflecting Musk’s desire to create a company that would provide renewable energy solutions across many sectors.
Brokers that Offer Tesla Shares
All stockbrokers that have direct or indirect (via a partner stockbroker) access to the Nasdaq exchange and other stock exchanges where Tesla is traded offer the shares for trading. However, we have compiled a list of the best brokers that offer Tesla shares after considering certain factors, such as trading commissions, security, research tools, and user experience.
Should I Invest in Tesla Stock?
Tesla’s business is centered around green energy, which is the future of energy. The company is also making investments in autonomous driving and the concept of robotaxi. Initially, investors were concerned about profitability, but the company has started making consistent profits. So, the stock is a good one to buy and hold.
Tesla Stock Investment Potential
Tesla is a growth stock, so its fundamental metrics cannot justify its explosive growth in 2020. The company is innovative and continues to disrupt the transportation and clean energy markets. It is making investments in autonomous driving and the concept of robotaxi.
The company is a leader in its industry, developing its own critical infrastructure and gathering more control of its supply chain. Tesla has not lost market share in the EV market and traditional autos have had a really hard time producing a car that’s on par with Tesla in terms of a dollar-per-performance or efficiency basis. Considering Tesla's outlook, the company is positioned for long-term success.
What Kinds of Investors Should Include Tesla Stock in Their Portfolios?
Tesla stock is quite volatile, which makes it more suitable for aggressive investors and traders. Day traders and swing traders may find the stock appealing because of the opportunities presented by the somewhat sharp price action. The stock has fallen by as much as 10% and rallied by as much as 19% in one trading session.
However, Tesla also appeals to investors looking for long-term growth. Its long-term potential, owing to its disruptive tendencies, could make it a stock to hold as the world is increasingly tilting towards cleaner energy.
How Much Should I Invest in Tesla?
The amount you can invest in Tesla will depend on the size of your disposable income, investing experience, age, investment time frame, and your broker’s minimum deposit requirement. However, the general rule of thumb is to invest only what you can afford to lose and have a diversified portfolio. Invest not more than 2% of your investment capital in one trade.
How to Buy Shares in Tesla Stock?
You can buy shares of any publicly traded company via a stockbroker, but some companies may also allow you to buy directly from them through what is known as a direct stock purchase plan (DSPP). Unfortunately, Tesla does not have such a plan at the time of writing. The only way to buy Tesla stock is by purchasing it through a broker.
Buy Tesla Shares through a Broker
Log into your trading account and search for Tesla using the appropriate ticker (TSLA). Click on the stock and place your buy order. You can use a market order or limit order. The order is sent to the floor of the stock exchange for execution, and once it has been registered, you will see it displayed on your screen dashboard.
Frequently Asked Questions
Tesla focuses on green energy, which is at the center of the desire to curb climate change. The company is disrupting the transportation and clean energy markets. Buying the stock now could be like buying Amazon stock at the turn of the millennium.
Tesla has a potentially profitable business model, but it took the company some time to start making consistent profits. Ironically, Tesla's first profitable year was 2020 that was dominated by the coronavirus pandemic.
Tesla does not pay cash dividends on its common stock. The company just started reporting consistent profits in 2020, so it may not be ready to pay dividends anytime soon as it may want to retain earnings to pursue growth.
Yes! While fundamental analysis helps you to determine the financial health of the company, you need to perform technical analysis to know the right time to buy. You may want to buy on a pullback to a support level or the breakout of a resistance level: it’s technical analysis that will tell you the price level to watch out for.
The golden rule is to invest only an amount you can afford to lose and not to commit more than 2% of your investment capital to any single trade. If you’re trading rather than investing, always place a stop-loss order so you don’t lose more than you intended to risk. However, be careful not to set the stop loss too close to your entry level nor too far from it.
Tesla stock is primarily listed on the Nasdaq exchange. However, the stock is also traded on the London Stock Exchange, Mexico Stock Exchange, Frankfurt Stock Exchange, and the Xetra marketplace in Germany.