Tesla Stock Predictions
There are few stocks out there as intriguing as Tesla Inc (NASDAQ:TSLA). The green tech company with a penchant for innovation has been an intriguing share ever since it made its way to the public market. TSLA stock predictions have been difficult to make as evidenced by the TSLA stock history. As such, with an often unpredictable Tesla stock price, investors are wondering if a company so focused on the future will be a viable and stable investment in the present.
The company has been marked by ups and downs, with its first three years on the market showing slow but steady growth, only to have the share prices explode in 2013 from the $30.00-per-share range to the near $200.00-per-share range.
Tesla investments, especially in that time frame, have been some of the best moves you could have made on the market. Jumping over 1,200% in its less-than-seven-years lifespan means that early backers and proponents of a positive TSLA stock forecast were clearly pleased with Tesla stock growth.
But that by no means that the Tesla stock forecast is stable. In fact, with U.S. President Donald Trump in power and his intriguing relationship with Elon Musk developing, I’d argue that this is one of the least stable times in Tesla stock history. That by no means makes it a bad investment or gives it a negative Tesla stock prediction, but there are a number of factors that, if they play out for good or ill, will have a dramatic impact on the Tesla growth rate.
Data courtesy of Tesla Inc
Should I buy Tesla stock? That’s a question that many investors should be asking themselves as Elon Musk’s brainchild represents one of the most promising—if unpredictable—companies on the market.
It all comes down to Tesla’s conceit: that this will be the car, power, and energy company that will rule the future.
While an ambitious drive, there are certainly reasons to believe that it can accomplish this move.
Take, for instance, Norway. While a relatively small—if extremely rich—country, the Scandinavian nation has proposed a bill that would ban the sale of fossil fuel-powered cars in the country by 2025. (Source: “Norway to ‘completely ban petrol powered cars by 2025‘,” The Independent, June 4, 2016.)
And Norway is by no means alone. The U.S., not often thought of as being on the forefront of climate change regulation, put forward several mandates through the Environmental Protection Agency (EPA), such as having corporate vehicle producers have fleets that average over 50 miles to the gallon. (Source: “Midterm Evaluation of Light-Duty Vehicle Greenhouse Gas (GHG) Emissions Standards for Model Years 2022-2025,” United States Environmental Protection Agency, March 15, 2017.)
Of course, a change in government could see some of these standards be reconfigured as we go forward. In fact, the Trump administration has already begun setting about rolling back some of these mandates after having met with automakers in Detroit. (Source: “Trump begins rollback of Obama’s car pollution standards to curb emissions,” The Guardian, March 15, 2017.)
And that brings us to two important conclusions that should have a heavy impact on your Tesla investments and TSLA stock forecast: the first is that fuel-efficient cars are the way of the future, the second being that the current U.S. government may delay that future in one of the largest markets on earth.
And that brings us to the Elon Musk Trump relationship.
These two may seem like polar opposites, and in a lot of ways, they are. Trump speaks of “Making America Great Again” and bringing back old school jobs like manufacturing and coal. Elon Musk, by contrast, thinks about putting humans on Mars.
It’s a strong divergence between the two, but that hasn’t hampered them from forming a working partnership of sorts, not to mention there’s plenty of room for them to agree on a number issues.
Musk is a part of Trump’s Business Advisory Council, which is going to garner the tech luminary some clout with the commander-in-chief. One of Trump’s most trusted advisers (and one of his sole backers from Silicon Valley) is Peter Thiel, who worked with Elon Musk when they were both together with Paypal Holdings Inc (NASDAQ:PYPL). These connections could prove crucial to Trump enacting policies favorable to the TSLA stock price.
Another boon for the Tesla stock forecast, at least in the next four years under Trump, is that his plan to increase high-paying manufacturing jobs coincides with Musk’s plan to have his futuristic “Gigafactories” cropping up all over the U.S. The first one is currently semi-operational while it continues its expansion in the Nevada desert.
Which brings us to another reason that Trump will be so crucial to Tesla’s stock outlook: subsidies.
Tesla is partly fueled by $2.391 billion in government subsidies. Over half of that subsidy—$1.29 billion—derives from Nevada tax incentives for Musk’s Gigafactory. They are primarily comprised of tax breaks over a 20-year period. (Source: “Complete breakdown of the $4.9 billion in government support the LA Times claims Elon Musk’s companies are receiving,” Electrek, June 2, 2015.)
And another green tech company run by Musk that has joined together with Tesla, SolarCity Corp (NASDAQ:SCTY), takes in about $2.5 billion from the U.S. government via subsidies, tax exemptions, and other deals.
And this all amounts to the main reason that I don’t think you can have a clear Tesla stock prediction or classify Tesla as a stable investment in 2017. It all comes down to one word: Trump.
The president is hardly known for being an even-keeled type of guy. He seems to govern with his emotions and we’ve seen that play out to some stocks’ horror and other shares’ delight in the past. Ultimately, how the Elon Musk Trump relationship develops will have what I believe to be the largest impact on Tesla stock moving forward.
If Trump’s EPA puts standards and regulations that favor Tesla along with continuing to supply those much-needed subsidies, then Tesla can thrive in this market.
If, on the other hand, Trump sours to Tesla, then I expect the repercussions will be felt in the market.
TSLA Stock History and Its Future
Chart courtesy of StockCharts.com
While the president will likely play an outsized role on the TSLA stock price in particular, there are a great many other factors at play for those looking to make Tesla investments.
The Tesla “Model 3,” for instance, could be a game-changer of a vehicle that, well, trumps Trump. That’s because the first mass consumer-focused offering from Tesla has the potential to propel the Tesla growth rate to new heights.
The Tesla Model 3 is currently priced at $35,000 before incentives, which makes it the most affordable car in Tesla’s fleet. Production is slated in mid-2017 for delivery in mid-2018.
If the Tesla Model 3 release goes without a hitch, then it could be exactly what investors want to see that will spur on a huge Tesla growth rate and a positive swing in the Tesla stock prediction.
Of course, others believe that not only will the Tesla Model 3 not ever see the light of day at $35,000 a unit, but in fact it will sink Elon Musk’s business. Which, again, hardly makes for what we would traditionally term a stable investment.
But I don’t believe the Tesla Model 3 will kill the business. In fact, I think it will jump-start the company.
Consider that electric vehicles (EV) will amount to 71 million units sold in 2050, according to some analysts. At a 10% market share of the EV market, which is commensurate with Tesla’s current hold, not including the potential Tesla Model 3 boost, that would factor out to annual sales of 7 million units, or six percent of the overall automotive market. (Source: “Tesla: Few Historical Precedents?” Barron’s, March 14, 2017.)
With an average price point of $45,000, Tesla would reap revenues of over $320.0 billion (in 2050 dollars, of course). Still, the potential for the company is huge and I believe that it has not only the technology but the leadership and vision surrounding it to make it a winner in the long-run.
And Tesla has hardly slowed in making some big moves for its Model 3. The company plans to raise $1.15 billion through a sale of common stock and convertible senior notes in order to support the new vehicle’s release. (Source: “Tesla,” U.S. Securities and Exchange Commission, March 15, 2017.)
Which makes sense, as Tesla will have to significantly increase its production if it wants to meet all the pre-orders and hype around the Model 3. (Source: “Tesla Is Raising $1.15 Billion to Fund Its Model 3,” Fortune, March 15, 2017.)
And we didn’t even touch on how well the TSLA stock price has performed in 2017. Shares are up nearly 20% since the beginning of the year, up more than 23% over the past 12 months, and since Trump has come into power, 31%.
The simple fact is that there are so many things going for Tesla that the company is ready to make some big gains in 2017. The only problem with a definite TSLA stock forecast is that there are so many variables, more than in most cases. Tech companies operating on the cusp of the future usually deal with more volatility than most, but the sheer array of factors that could realistically swing one way or the other make TSLA stock not for the risk-averse.
If you are one of those willing to put a little bit of sweat in the game, however, then you could do a whole lot worse than Tesla investments. And for a Tesla stock forecast beyond 2017, this could be one of the biggest tech companies we’ve seen in a long time. As such, I’m calling this stock unstable, but also one of the best picks on the market.