Investing in Tesla Shares

May 20, 2021 18:15 UTC

As the world becomes increasingly concerned about the environment, interest in green investments has risen sharply in recent years. One of the stand out companies which has benefitted from this increased interest is electric car manufacturer Tesla. 

Since the beginning of 2020, a multitude of investors have swarmed to Tesla, turning it into one of the hottest stocks in the world. In this article, we will take a look at the company behind the popular stock, evaluate whether Tesla stock is a good investment and demonstrate how to invest in Tesla shares with Admirals (formerly Admiral Markets).

How to Invest in Tesla Shares

Tesla Inc. - A Brief History

Tesla Motors was founded in 2003 by Mark Tarpening and Martin Eberhard, changing its name to the current Tesla Inc. in 2017.

In 2004, Tesla led its series A funding, raising $7.5 million, $6.5 million of which was contributed by Elon Musk. Musk subsequently joined the company as chairman of the board of directors and later, in 2008, stepped into the role of CEO following the departure of founders Tarpening and Eberhard.

In June 2010, Tesla launched an Initial Public Offering (IPO) on the NASDAQ raising $336 million from the issuance of 13.3 million shares of common stock at a share price of $17. In December 2020, following four consecutive profitable quarters, Tesla was included in the S&P 500 for the first time. 

Tesla currently offers four different automobile products, insurance plans designed specifically for its cars and other vehicle services. Through its subsidiary, Tesla Energy, it develops and sells solar energy generation systems and battery energy storage products.

Tesla Financial Performance

It is important to remember when you buy shares, that you are essentially buying a portion of the company. Therefore, it is important to look in detail at the company, its fundamentals and understand how it makes its revenue.

Tesla Revenue

Source: Chart created by author with data from Tesla

Above, we can see a chart detailing the annual revenue generated by Tesla since 2009. The vast majority of this is generated by automobile sales, which accounted for 83% of revenue in 2020.

The chart below shows that up until 2019, Tesla was a loss making company. 2020 marked the first year in their history in which they closed a full year of profit.

Tesla Net Income

Source: Chart created by author with data from Tesla

Tesla Q1 2021 Financial Results

In April 2021, Tesla released their first quarter results, a brief summary of which we have included below:

Total Revenue

$10,389 million

Net Income

$438 million

Earnings Per Share (EPS)

$0.93

Vehicle Deliveries

184,877

A deeper look into the report tells us that Tesla generated $272 million of revenue from the sale of Bitcoin, whilst retaining $1,331 million worth of the cryptocurrency.

Furthermore, Tesla reported that deliveries of the new Model S will begin in May, with deliveries of the Model X expected to commence from the third quarter of 2021.

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Tesla Stock Split

On 11 August 2020, Tesla announced a 5:1 stock split, which would take effect on 31 August 2020. On the day of the announcement, Tesla’s share price closed the session at around $1,370 and in the following days, share price increased steadily, closing at around $2,200 per share on 28 August - the last trading day before the split took effect.

On 31 August 2020, the amount of shares outstanding was increased five-fold and, simultaneously, the share price was divided by five. 

The purpose behind the Tesla stock split was to increase liquidity and  encourage stock ownership by making investment more accessible. At the same time, they also raised around $5 billion by selling new shares.

In the chart below, the first vertical red line indicates the day which the Tesla stock split was announced and the second represents the day it took effect. Despite the initial jump in share price after the announcement of the stock split, we can see that after it came into effect, the price corrected itself before moving sideways for the next couple of months. 

Tesla Stock Split Daily ChartDepicted: Admirals MetaTrader 5 - Tesla Daily Chart. Date Range: 6 July 2020 - 5 February 2021. Date Captured: 18 May 2021. Past performance is not a reliable indicator of future performance.

The sideways movement ended on 16 November, when the price began a bullish trend rising 74% by the end of the year.

An Analysis of the Tesla Share Price

For Tesla’s share price, 2021 started much the same as 2020 left off, with a strong bullish rally. 

Between 1 January and 22 January, share price rose 20% - an increase which was helped by the company’s announcement that it had come within touching distance of its car delivery target for 2020. The company’s target had been 500,000 cars and it ended up delivering 499,647, despite the effects of the pandemic.

Below we will take a look at the history of the Tesla share price from September 2016 up until May 2021 and analyse its behaviour. 

Tesla Weekly Chart MetaTrader 5Depicted: Admirals MetaTrader 5 - Tesla Weekly Chart. Date Range: 25 September 2016 - 18 May 2021. Date Captured: 19 May 2021. Past performance is not a reliable indicator of future performance.

As we can see in the chart above, up until October 2019, the share price was trading within a range of around $35 to $75.

Tesla’s share price then accelerated upwards, surpassing previous highs and reaching an all time high of $193 per share in February 2020. This upward surge represented a 274% increase in share price in just over three months!

Subsequently, the outbreak of the Covid-19 pandemic shocked the world and its repercussions were felt heavily on the stock market. Investors cashed in on their gains and Tesla’s share price dropped 64% from its high of $193 to a low of $70 in just six weeks.

But in the middle of March, the stock market rally resumed, with many investors seeking out Tesla and other technology stocks as a way to ride out the pandemic.

As we mentioned earlier, after the Tesla stock split in August 2020, there was a period of consolidation and readjustment, after which the share price began an almost vertical ascent more than doubling in value from $404 in November to reach $900 per share on 25 January 2021.

Positive results released by Tesla throughout 2020 had boosted investor confidence. However, the decision to carry out a stock split proved decisive, encouraging many new investors to purchase shares and pushing the price higher.

Worse than expected end of year results released on 27 January 2021, problems in the supply chain which caused the production of the Model 3 in the US to halt and widespread falls on Wall Street in the technology sector - all contributed to a considerable drop in share price. After reaching the high of $900 on 25 January, share price plummeted to $540 on 5 March 2021.

Tesla released the first quarter results for 2021, which, although positive, have not caused share price to recover the highs of January. Concerns surrounding the impact of a global shortage of computer chips on production has caused the share price to lose ground again after recovering throughout March and April.

Does this latest drop in share price represent a mere setback and an opportunity to buy Tesla shares low? Or is the Tesla bubble starting to burst?

Trade Stock CFDs with Admirals

With a Trade.MT5 account from Admirals, you can trade Contracts For Difference (CFDs) on Tesla stock and over 3,300 other shares around the world! CFDs allow traders to speculate on both rising and falling prices, whilst also benefiting from the use of leverage. Click the banner below to register for an account today:

Trade Stock CFDs with Admirals

Elon Musk: Visionary or Liability?

It would be difficult to write an article about investing in Tesla stock without mentioning their controversial co-founder and current CEO Elon Musk.

It is true that under Musk’s leadership Tesla has developed into one of the biggest success stories of the last decade. However, he has been personally responsible for several setbacks in the company’s share price during his time at the helm.

For example, in August 2018, Musk suggested on Twitter that he could take Tesla private at $420 per share, a price which, at the time, was more than a 20% premium to the share price. As a result, he was sued by the US Securities and Exchange Commission (SEC) who asserted that the statement was false and misleading to investors.

Musk and Tesla were each fined $20 million and he was forced to step down as Tesla chairman for three years, but allowed to remain CEO.

Other notorious and damaging incidents have included:

  • Being the recipient of a libel lawsuit in August 2018 for defamatory tweets directed at a British diver
  • Smoking cannabis whilst appearing on a podcast in September 2018. As a result, Tesla’s share price opened the next day’s session 8% lower than the previous days close
  • Dissemination of unfounded claims downplaying the severity of the Covid-19 pandemic
  • Declaring on 1 May 2020 that he thought Tesla stock was priced “too high” - a comment which led Tesla’s share price to fall 8.8% during the session.

Should I Buy Tesla Stock?

As we mentioned earlier, before investing in Tesla, or any company for that matter, you must conduct a vigorous appraisal of their fundamentals and analyse its business model in depth. The difficulty in making the decision of whether or not to invest in Tesla lies in the fact that the company is yet to establish itself in the long term.

The first quarter of 2021 marked the company’s seventh consecutive profitable quarter, which is definitely a positive sign. 

Furthermore, as global demand begins to shift towards greener technologies, Tesla finds itself well positioned within this field with technological advantages over many of its competitors.

The past two years have seen Tesla gain considerable favour with investors and analysts alike and there will be plenty of people who will see Tesla as a good long term investment. However, buying Tesla stock is certainly not for the faint hearted and you can expect continued volatility in the share price as Tesla looks to cement its position within the automobile industry.

How to Invest in Tesla Shares With Admirals

With an Invest.MT5 account from Admirals, you can buy shares in Tesla and over 4,300 other listed companies! In order to open an account and start investing, follow these steps:

  1. Register online with Admirals
  2. Log in to your Trader’s Room account
  3. Click on ‘Open Live Account’ and complete the application form. You will need to provide your contact details, passport number and tax identification amongst other details
  4. Upload the requested documents in order to verify your identity

Once you have completed the application, it will be reviewed by Admirals who will contact you by email to advise you of the outcome. If your application is successful, you will also receive your account information by email.

In order to invest in Tesla shares, you will need to do the following:

  1. Download the MetaTrader 5 trading platform
  2. Open the trading platform and log in using the account information emailed to you by Admirals
  3. Press Control + U to open the Symbols menu (shown below). Here you can search for the instrument you wish to trade and, once located, highlight it and select ‘Show Symbol’ and then ‘OK’.

MetaTrader 5 SymbolsDepicted: Admirals MetaTrader 5 - Symbols

  1. Locate the trading symbol in the ‘Market Watch’ window on the left hand side of your screen, right click on it and select ‘Chart Window’ to open a price chart, like the one shown below.

Tesla Daily ChartDepicted: Admirals MetaTrader 5 - Tesla Daily Chart. Date Range: 10 March 2020 - 14 May 2021. Date Captured: 17 May 2021. Past performance is not a reliable indicator of future performance.

  1. Select ‘New Order’ from the top of your screen, enter how many shares you wish to purchase, as well as a stop loss or take profit if necessary, and click ‘Buy’

Tesla New Order MetaTrader 5Depicted: Admirals MetaTrader 5 - Tesla New Order. Date Captured: 17 May 2021.

About Admirals

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Roberto Rivero
Roberto Rivero
Financial Writer, Admirals, London

Roberto spent 11 years designing trading and decision-making systems for traders and fund managers and a further 13 years at S&P, working with professional investors. He has a BSc in Economics and an MBA and has been an active investor since the mid-1990s