Tesla is often referred to as a risky stock to invest in, but it’s hard to argue against the consistent upward trend in its stock prices. The recent news that Tesla split its stock 5-to-1 caught some by surprise, and any investor should be pleased with the split. While Tesla has earned the benefit of the doubt since seemingly every business decision CEO Elon Musk makes turns out positive, there are some concerns with the stock split most people aren’t talking about. Here are some of the most significant issues an investor should consider following the recent Tesla stock split.
Competition Could Take Away Market Share
Tesla has had some competition for several years, but no other company has been able to slow down its growth. Despite Tesla’s established brand name, other companies like Porsche, Lexus, Honda, General Motors, and Ford are ramping up their electric vehicle industry efforts. While Tesla has defied all the odds against them up to this point, history suggests its competition will increase and eventually take away some of its market share. Part of an investor’s portfolio management strategy should be to look closely at these competitors and how quickly they may become a threat to take away market share.
High Price-To-Earnings Ratio
The high price-to-earnings ratio has always been a point of discussion surrounding Tesla. It clearly shows investors are willing to pay a premium per share due to the high expectations the company carries. The stock split should make investors look a little harder at the price-to-earnings ratio and determine whether the high price is worth it. Time will tell whether the ratio will continue rising or finally see a decline, especially in the unpredictable world we live in today.
Sustainability Following The Stock Split
It seems like Tesla has been the hot stock for several years that every investor wants a piece of. It’s hard to disagree with those investors since Tesla’s stock rises consistently. Stock experts sometimes have no choice but to continue recommending Tesla as a “buy” stock since there’s no concrete reason to recommend otherwise. As has been predicted for years, Tesla’s status as the hot stock has to end eventually and experts are waiting for the time to come. Will the recent stock split be the turning point that makes Tesla lose some traction in the markets? This answer may not be known for weeks or months in the future, but it’s something to follow closely as an investor.
Stock Investing Info helps investors put together investment strategies based on their risk tolerance, short-term goals, long-term goals, and many other factors. Some of the most common questions we get asked revolve around Tesla since it’s one of the market’s hottest stocks today. The recent 5-to-1 stock split is being disregarded and treated as not a big deal by most of its loyal investors, but some of the concerns shouldn’t be ignored. If you have any questions or concerns about Tesla stock, contact us today and we would be happy to speak with you.