Despite being one of the hottest car companies in the world right now, Tesla stock won’t be able to cruise to success. Even great ideas struggle to find funding and partners under normal circumstances, let alone when obvious risks are involved. That leaves Tesla stock with many risk factors that could hinder its future growth. Many things could hurt Tesla stock in the long run. A recession would dampen demand for expensive electric cars. Commercial competition could chip away at their market share, and electric car battery costs need to come down if electric models are ever going to go mainstream. These mainstream significant issues that investors need to recognize before diving headfirst into buying shares of TSLA stock (and any other company in this field). According to analysts, if you’re still interested in buying shares of TSLA stock, Tesla is one of the best stocks to buy now.
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TSLA Stock Forecast: Product Quality
Quality is important to every company in every industry, but it’s especially crucial in the auto industry. If a car has a low-quality rating, it could be a death sentence for that vehicle’s sales. Car owners are finicky customers, and word of mouth is a potent force. If just one person has a bad experience with a car that’s widely considered to be a poor quality model, it could sink that vehicle’s sales. Tesla has had a few problems with product quality that could stem from a lack of experience in the industry. There have been issues with body panel gaps, the sunroof, paint quality, and the suspension. Tesla’s Model 3 had a sizable amount of points during production, and Tesla’s customers report a decent amount of issues with their cars in general. The good news is that Tesla is well aware of these issues and has vowed to find solutions. The bad news is that Tesla is also having trouble getting its production issues sorted out, as evidenced by its latest production update that shows a large number of missed targets. Tesla has been a great innovator in the auto industry, but it will be a different story if the company finds itself under financial stress while trying to increase product quality.
TSLA Stock Forecast: Debt and Losses
One of the most significant risks to Tesla stock is that the company won’t be able to find a way to become profitable. Tesla has had a hard time making a profit in each of its last three fiscal years, and it’s expected to post a loss again in the current year. That has a lot to do with Tesla’s capital-intensive business model. Tesla is investing heavily in its production facilities to meet the growing demand for its electric cars. That capital expenditure has weighed heavily on Tesla’s profit margins, as the company has had to spend billions of dollars that it hasn’t been able to generate in revenue. Tesla is also paying down debt to become more financially robust. That has eaten into the company’s cash reserves, and Tesla has been forced to tap into its revolving credit line to keep the lights on. Tesla has a decent amount of cash and cash equivalents on its balance sheet, but it doesn’t have a lot of room to borrow more money. To maintain operations and keep deliveries on track, Tesla will have to raise more capital sooner or later. Tesla stock forecast is still very much a buy-and-hold investment, but it’s worth keeping an eye on Tesla’s cash flow and debt levels to make sure this thing doesn’t turn into another Solyndra.
TSLA Stock Forecast: Competition from Other Auto Makers
Tesla stock has gained a lot of steam in recent years, but that doesn’t mean that the company will be able to maintain its market share. Tesla has managed to get a leg up on the competition, but that doesn’t mean that that will stay the same going forward. Other automakers, such as Mercedes-Benz, have already announced plans to produce their electric cars, and others are likely to follow suit. Tesla plans to remain focused on luxury, high-end electric cars, but commercial manufacturers will likely gbattery that is ow-cost, high-volume models. That could quickly eat into Tesla’s market share, and it wouldn’t be surprising to see Tesla lose some of its market shares as other companies ramp up their production of electric cars.
TSLA Stock Forecast: Electric Car Battery Costs
Tesla has been a leader in the electric car industry, but there’s still a long way to go if the company wants to make electric cars a viable option for the masses. Tesla’s current model uses an electric battery prohibitively expensive to mass-produce. To put things in perspective, Tesla’s Model S battery costs $190 per kilowatt-hour to produce. That’s much higher than the average rate of $119 per kilowatt-hour for lithium-ion batteries. It’s also twice as expensive. as the $61 per kilowatt-hour rate for lead-acid batteries. If Tesla wants to make electric cars a common sight on the road, it will have to find a way to bring down the cost of its battery packs. Tesla is working on two new battery projects, one in Tesla’s Nevada-based Gigafactory and another in Shanghai, China. The Nevada plant will focus on producing lithium-ion batteries for Tesla’s commercial and residential energy products, while the Chinese plant will be used to make Tesla’s automotive batteries. That will help increase Tesla’s production capacity, but it will take time to see results.
TSLA Stock Forecast: Tesla’s Operational Independence
Investors often overlook this, but the fact that Tesla is a privately owned company could become a significant risk to Tesla stock. To begin with, Tesla is dependent on the generosity of its owners for funding. As a privately held company, Tesla doesn’t have to answer to investors who want to see a dividend or public shareholders who wish to see a return on their investment. That can be a good thing, as it gives Tesla some freedom to make long-term strategic moves without worrying about keeping investors happy. The downside is that it’s tough for Tesla to raise money when it needs it. Tesla has had to tap into its revolving credit line multiple times, and the company might need to turn to investors again in the future. The problem is that Tesla is currently indebted to its owners for funding. If Tesla’s owners decide to become less generous with their money, or if they pull their financing entirely, there’s not much Tesla can do. That leaves Tesla in a precarious position, and it’s something that investors need to keep in mind whenever they’re thinking about buying Tesla stock.The stock is trading at the time of writing at $703.94, the Dow Jones Today at $31,594, the S&P at $3,939 and the Nasdaq at $11,467.
Conclusion
Tesla is one of the best-known car companies today, but that doesn’t mean the company is a slam-dunk when it comes to Tesla stock. There are several significant risks associated with investing in Tesla, and this article has discussed five of the most important ones. Regardless, Tesla has proven itself capable of overcoming obstacles in the past, and it’s well-positioned to continue growing as an auto company in the years ahead. If you’re interested in buying Tesla stock, now is a great time. There are plenty of discounted Tesla stock options available, and the future looks bright for this innovative company.
