They say that one of the best ways to invest is to invest in things that you like. They also say that you make more money investing the sooner you start. So, if you like Tesla and want to start investing, then yes, it is worth buying a single Tesla share. But if you actually want to make money on a single Tesla share, it is not cost effective.
I worked out if buying 1 TSLA share was cost-effective (from GBP perspective) and generally it is not if you are not using fractional shares or CFDs with no commission.
Here is what an example assuming a ‘Perfect Buy’ scenario.
Bought (Jan 23) 1 TSLA Share @ $110 @ GBPUSD = 1.18 + £10 international commission = £103.2
Sold (Sep 23) 1 TSLA Share @ $250 @ GBPUSD = 1.28 + £10 international commission = £185.3 (+79%)
- It was more cost-efficient before Tesla’s share price split (3-for-1) back in 2022.
- Each round trip commission for retail international dealing totalled £20.
- Also, the FX rate varies between brokers. Although most are too high for retail investors!
The best way to buy a single share if you can’t afford the high price of 1 Tesla share, is to buy a slice of a share using fractional shares.
Tesla is one of the pioneers in the electric vehicle (EV) market.
The company, under the leadership of Elon Musk, has been growing by leaps and bounds. From a fringe player in the automobile industry, Tesla is now the trend setter. So much so that the market awarded the company a $1 trillion valuation back in 2021.
Revenue for the last four quarters (ending July) totalled about $94 billion. Deliveries of Tesla Models aggregated to 1.64 million vehicles over the same period. High production growth is maintained; while financial cash flow is slowly accumulating.
A quick look at its recent quarterly results tells you that, by most metrics, Tesla is a growing company:
Source: Tesla quarterly slides
The question now is whether you should buy Tesla shares.
In investing, there are always two sides to an argument. On the positive side, there are three reasons why you should consider investing in Tesla shares.
First, the company is a growth company in a new sector (EV). Its commanding lead here is about to converted into profits after years of deep capital investment.
Second, the company has a strong advantage in its ‘giga factories’ in which advanced robotics are used to build Tesla cars at a pace that other traditional car factories can’t match (without huge capital outlay). In one of its tweets, Tesla proudly showed the world its latest robot – Godzilla – at work:
Third, the company has growing experience in training data for future AI and autonomous driving due to increased customers. This may extend its lead in the next step of the automobile revolution.
However, the risk in buying a Tesla share now can not be discounted too.
For one, competition is heating up. Did you know BYD, the Chinese EV manufacturer, is also selling millions of electric cars? Accord to some statistics, BYD is near the top spot last year in the number of electric vehicles sold. Meanwhile, traditional manufacturers are all muscling into the EV sector as they faces a titanic struggle against Tesla. Sure, not all will survive the gas-to-battery transition. But neither will they all perish. Those that survive will be in a much stronger position.
Second, the macro headwinds, namely high interest rates and inflation, are weighing on growth sectors. This may continue into the near future due to geopolitical tensions.
The last risk is that other companies (especially newer ones) may prove to be a better bet than Tesla. With its $800 billion market cap (ranked 7th in the world), the upside for Tesla is no longer what it was back in 2019. Realistically, can you make 10-20x your money here?
Therefore, Tesla is not a share for everyone. It is volatile, and if you bought at the wrong time, deep drawdowns may happen. You have to be careful about its wide price swings as it may trigger stops unnecessarily.