Tesla Inc (TSLA)

Tesla, Inc. Overview

Named after engineer Nikola Tesla, Tesla Motors was founded in 2003 by Martin Eberhard and Marc Tarpenning. In 2017, the company changed its name to Tesla, Inc., and its Shares were listed on the Nasdaq Stock Exchange under the ticker symbol ‘TSLA’ following its Initial Public Offering (IPO) in July 2010. Elon Musk, an early investor and board member since April 2004, became the company’s CEO in October 2008 after Eberhard stepped down.

Headquartered in Austin, Texas (US), the company operates through two core operations: ‘Automotive’ and ‘Energy Generation and Storage’.

The Automotive segment designs, develops, manufactures, sells, and services Electric Vehicles (EVs). Tesla cars have become a household name, with new models planned for production this year and many consumers associating EVs as the future of the automotive industry.

Under the Energy Generation and Storage segment, the company designs, manufactures, installs, sells, and leases energy storage products and solar systems. This includes installing and servicing solar panels for domestic homes, as well as products for energy storage for both residential and commercial use.

Why Trade Tesla (TSLA) Shares?

Tesla reported a profit of US$2.2 billion for Q3 24, marking a significant increase compared to US$1.5 billion and US$1.1 billion in Q2 24 and Q1 24, respectively. This performance and Elon Musk’s plans to produce a mass-market EV codenamed 'Redwood' in mid-2025 could further contribute to its growth.

The company’s market capitalisation surpassed US$1 trillion following the US Presidential election result on 5 November 2024. On 12 November 2024, President-elect Donald Trump appointed Elon Musk, alongside Vivek Ramaswamy (American entrepreneur), to head the newly formed Department of Government Efficiency (DOGE). This move has raised questions about whether Musk can maintain his focus on Tesla while also managing the responsibilities of DOGE.

The TSLA Stock rallied to a fresh all-time high of US$488.54 in late December 2024 and has since established a 23% correction to a low of US$373.86. Current price action suggests a possible bottom (higher low), which could prompt investors, particularly trend followers, to monitor the Share price closely.

What Influences the Price of TSLA?

• Earnings

Analysts and investors widely watch earnings reports, which are usually released quarterly. An earnings report delivers fresh information about a company’s standing, displaying data on revenue, income, and production levels. It will also present forward guidance, offering estimates of future company performance.

A key observation is that an earnings report that surpasses market estimates can increase investor confidence and bolster a company’s Share price. Conversely, if financial performance falls short of market expectations, this can lead to a loss of investor confidence, potentially causing the Share price to fall.

• Stock Splits

A Conventional Stock split occurs when a company divides existing Shares into additional Shares, usually due to a high Share price. However, with a Stock split, the Share price will also decline, so the company's total market value (and your investment value) remains unchanged; investors will simply receive more Shares at a lower price. This can increase liquidity for the company, ultimately influencing the Share price.

Tesla has undergone two Stock splits in the past. A 5-for-1 split in August 2020 saw the Share price decrease from US$2,250 to US$450, and a 3-for-1 split in August 2022, which observed the Stock fall from US$900 to US$300.

• New Initiatives and Product Launches

Although increased production can boost consumer demand and drive revenue, which, in turn, may lead to higher Share price values, lacklustre sales and unexpected challenges can have the opposite effect.

To help boost sales, Tesla launched a short-term Model Y financing incentive in May 2024. These initiatives are often viewed as positive among the investing community; in this case, the Stock observed a moderate advance following the announcement. Product launches, particularly new and improved models that are more affordable, can also underpin the Share price. An example of this was in Q1 24 when Elon Musk signalled that the production for more affordable EVs would be ready sooner than expected. This announcement had excited investors in after-hours trading and lifted the company’s Share price by more than 10%.

• Market Shift and Regulatory Changes:

As concerns over carbon footprints grow and emission control policies tighten globally, the demand for EVs is expected to rise. However, a fall in fuel prices could encourage some consumers to retain their traditional vehicles. Initiatives like the Electric Vehicles Initiative (EVI), a multi-government policy forum dedicated to accelerating the introduction and adoption of EVs worldwide, can further boost the sales of EVs and improve demand for Tesla Shares.

• Market Sentiment:

Company-specific news, the economy, and geopolitics can influence market sentiment. Tesla's Share price can rise if investors have a positive overall market outlook but can also fall if negative sentiment exists. For example, Tesla's Share price rallied following the 2024 US presidential election, mainly due to optimism about policy changes under the new Trump administration.

• EV Market Trends:

Rising demand for EVs can increase Share prices. According to S&P Global, one in four new passenger cars sold will be an EV by 2030. Tesla's increased production of EVs and new, innovative models powered by Artificial Intelligence (AI) could be viewed favourably by investors. Conversely, lower sales or a slower-than-expected EV shift could affect profitability and thus weigh on the Share price.

How Can I Trade Tesla (TSLA) Share CFDs?

Given that the TSLA Stock recently established a correction from all-time highs and is showing signs of putting in a bottom, investors will likely add the Stock to their watchlist. Before considering a trade on TSLA Share CFDs (Contract for Differences), however, investors are encouraged to visit the FP Markets Academy. Designed to help investors learn about trading in the financial markets, the Academy provides easy-to-follow educational articles and videos.

CFDs are leveraged derivatives that enable investors to speculate and hedge across various asset classes, including Tesla. A distinguishing factor differentiating CFDs from physical Shares is that CFDs can be traded without taking physical ownership.

When trading TSLA Share CFDs – either long (buy) or short (sell) – investors agree to exchange the difference between a trading position's opening and closing prices, with all contracts settled in cash. CFDs also allow investors to trade TSLA with the advantage of margin – leverage – which means market participants can control a larger position by putting up a relatively smaller initial investment value (initial margin).