Tesla Q4 - Full Year of Profits

Is it a good idea to buy Tesla shares? We get asked that question a lot. South African investors love the association with Elon Musk, who grew up in Johannesburg and Pretoria. In addition, electric vehicle (EV) sales have boomed globally and the company has done very, very well.

Tesla reported quarterly results last night which were a little short of expectations, although they did post their sixth-straight quarter of profits. Looking ahead, some expected as many as 1 million cars to be delivered in 2021, but that could be too high based on last night's comments. Tesla remains on track to begin vehicle production from its new Berlin and Austin factories this year, so it's hard to say what the output will be.

The Tesla share price is very high relative to the company's current profitability. I'd say that the market assumption is definitely that other revenue lines will be added to Tesla's business in the future. Those could be in battery technology, solar power and autonomous driving.

There are significant incentives on offer in China and the EU for buyers of EV cars. In those regions there are bans on internal combustion engine cars coming by the end of the decade. Tesla has a small market share of the total motor industry, but the best prospects.

The stock fell in after-market trading last night, by about 5% to $820 per share. This could be a good buying opportunity, I suppose? It's important not to get too excited though, I'd say that only a small position in a portfolio is appropriate. I'd expect the investment to do well in the years ahead, but to be very volatile. Let us know if you would like to jump on board?

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