During 2020 in TESLA shares increased by almost 700%. But given that big rally and subsequent loss of profits, many investors may be asking, “Is it time to buy TSLA stock?” Before making a decision, think about all the pros and cons.
Benefits of buying Tesla stock
One of the biggest bright spots in Tesla’s latest earnings report was record production and deliveries. In the fourth quarter, Tesla produced 179,757 vehicles, a 71% increase over the same quarter last year, and far more than the 145,036 vehicles Tesla produced in the third quarter.
Tesla has set an ambitious goal of delivering 500,000 cars by the end of the year. Despite production line disruptions due to the pandemic, the company came incredibly close, delivering 499,647 during 2020. Tesla management thinks it can improve on that by promising 50% average annual growth in shipments over the next few years. .
Another sign of improved operations was free cash flow, which remained positive for the second consecutive year. Free cash flow reached $2.79 billion in 2020, more than doubling the $1.08 billion the company raised in 2019, with record free cash flow of $1.9 billion during the fourth quarter.
More vehicles rolling off the assembly line and improved financial health is an impressive combination. And while the company itself is doing well, macro trends also seem to be helping You are here right now.
In the long term, optimistic investors are pinning their hopes on fully autonomous vehicles. Dozens of companies are working towards this goal in one way or another, but Tesla’s lead is hard to beat. Tesla has been using cameras, radar and GPS for years to the point that Tesla cars are practically self-driving.
Finally, with President Joe Biden’s victory in November combined with Democratic control of Congress, Tesla offers more options. Companies that focus on green technologies with no emissions will be rewarded with tax breaks for consumers and producers. While those rewards have yet to materialize, President Biden’s ambitious plans to combat climate change point to plenty of future opportunities for Tesla.
Bottom line: Should you invest in Tesla stock?
Race for shareholders appears to be softening as the company turns to profitability quarter after quarter. Still, investors can’t ignore Tesla’s huge valuation multiples. And while the company reported total revenue of $31.5 billion for 2020, its current market capitalization is nearly $800 billion.
Tesla has become the largest car company in the world and now quietly occupies the first place in the industry. If things continue to go Tesla’s way, that shouldn’t change anytime soon, and if history is any guide, betting against Musk is generally a bad move.
Still, the risks remain: Tesla is no longer the only company making electric cars, and investors should be prepared for the possibility that its better-known rivals could displace Tesla. In short, investors interested in buying TSLA stock should add it to a well-diversified portfolio.