Tesla stock is soaring. Is it too late to get in?

2021 is a huge year for Tesla. Can it repeat last year’s success?

Tesla stock

Last year was very divisive from an investors point of view. While many experienced downfalls, Tesla had a spectacular year. Its stock was up 695% in 2020, making it one of the most valuable brands in the world with an estimated value of $630 billion. Elon Musk managed to attract amazing attention to his product line-up, self-driving technology, growth narrative and future expansion plans.

At the beginning of 2021, Tesla continues to be one of the best performers, rising nearly 25%. This turn of events was enough to make Elon Musk the richest person in the world and Tesla shares to surpass even Facebook. If this pace is maintained, Tesla stock could even match all of the last years’ gain by April.

Tesla stock

Tesla Non-Traditional Model Seems To Work

Tesla value and price movement can be difficult to predict. Investors are not pricing it based on how the company is performing at the moment. If this was the case, the company with half a million car sales a year would be far less valuable and certainly not more than the combined value of the top 10 car manufacturers in the world. What actually happens in that Tesla value is perceived based on their ability to keep rapid growth and to increase the mainstream interest in electric vehicles. With current forecasts, in 10 to 20 years, Tesla could become the worlds’ number 1 carmaker of both regular and electric cars.

Elon Musk always emphasised Tesla’s ability to generate better margins than traditional car manufacturers by dropping the middleman. By cutting out the dealers out of the equation, lower production costs and simple vehicle design Tesla manages to outperform its competitors by a mile. Its revenue has soared over the past five years, with a gross margin over 20% pushing it to the top of the auto industry.

Growing Concerns

During several past years, Tesla has practically enjoyed a monopoly status. However, other car manufacturers have started to catch on and Tesla is looking at some massive competition going forward. Nio, Volkswagen, General Motors, Nissan Hyundai, BMW and others have either started building their own EV production lines or have started investing heavily. Volkswagen has the capacity to build more than 300,000 cars at its new factory in China, with plans to expand to as many as 1.5 million EVs annually by 2023. This is problematic for Tesla because it has struggled to make money despite selling every car they make. If they decide to lower car prices, it will have a drastic impact on the bottom line.

Tesla stock

Another problem lays in the company’s autonomy department. At the moment, Tesla is the leader in autonomous driving. While investors think the prices will go up because of these software solutions, the more likely reality is that Tesla is simply grabbing easy money from early adopters. Currently, the most advanced autonomous driving technology is developed by GM and Alphabet. These companies could hurt Tesla stock in the long run by offering autonomous ride-sharing services that offer a much lower up-front cost business model.  

Is Tesla Stock a Buy Now?

No one can deny that the company’s growth is impressive. They have pioneered the idea of electric vehicles as a viable means of transportation in the 21st century. The Forex market has felt its impact throughout 2020, and this trend is likely to continue this year. What happens after that is anyone’s guess. Competitors are catching up fast and it is just a matter of day before the Tesla stock reflects on this new wave of electric vehicles in the market.

Experts say it is highly unlikely that share price will see a growth of more than 700% this year. They also point out that their biggest competitors have bigger budgets, so they can afford to take bigger risks, thus jeopardising Tesla’s flexibility. This year will undoubtedly be exciting for investors looking to expand their portfolio. The electric vehicle market is hardy a novelty at this point, but with so many innovations around the corner, this industry will be very popular in the trading community.

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