3 things you need to know if you’re buying a Tesla today

The 10-year rate of return is 2,420%, tesla (TSLA 0.96%) This was an excellent stock for investors to own. A relatively small $1,000 investment in December 2013 would be worth a whopping $25,000 today.

The stock is currently 42% below its all-time high in November 2021. Opportunistic investors may want to pull the trigger and buy the dip. But if you’re thinking of buying Tesla stock today, first take the time to understand these important factors about this business:

industrial environment

Tesla is taking an overwhelming lead. electric car The (EV) industry has elevated it to an enviable position. The company’s cars account for half of all new EVs sold in the United States.

The growth over the past 10 years has been remarkable. Revenues for the third quarter of 2023 (ending September 30) were $23 billion, up 5,236% from the same period in 2013. And this year, Tesla is on pace to produce 1.8 million vehicles. For comparison, the company delivered 22,000 cars in 2013.

But massive success goes unnoticed, and capitalism breeds competition. There are a plethora of automakers in the EV market today, which will certainly make it more difficult for Tesla to achieve the same level of rapid growth over the next decade.

The hot topic in the industry this year was price reduction. Even the almighty Tesla could not escape this pressure. In the process, the company’s margins declined.

Tesla’s premium brand status and strong manufacturing capabilities have helped the company deliver positive results. GAAP Net profit after 2020 is an achievement that smaller competitors can only dream of. This advantage gives Tesla more leeway to engage in ongoing price wars while remaining profitable.

macro headwinds

Tesla price/profit The (P/E) ratio is 76.7. This is very expensive compared to traditional car stocks such as: ford and general motors. This also means a significant premium for luxury car brands. Ferrari.

Investors have categorized Tesla as a technology company based on its disruptive and innovative potential. However, the macro background reveals that there are some things this business is not immune to.

Just look at the rise in interest rates. Since the Great Recession, interest rates have remained historically low until recently, sparking demand for loans like auto loans. Now, with interest rates rising, Tesla was only able to post single-digit sales growth in its most recent quarter.

“If macroeconomic conditions are tough, even the best ships will still go through tough times,” CEO Elon Musk said. 2023 third quarter performance announcement.

Musk’s Ambition

Ten years from now, Tesla may look like a completely different company than we’re familiar with today. Musk is committed to developing self-driving capabilities so Tesla could one day launch a robotaxi service. The hope is that people no longer want to own cars. Because using this service is incredibly cost-effective for consumers looking to get from one place to another.

Led by Ark Invest cathy wood, forecasts are generally very optimistic. The company, which owns a significant amount of Tesla stock, believes that by 2029 the global robotaxi market will generate $9 trillion in annual revenue, up from basically nothing today. Tesla is trying to be at the forefront of this opportunity.