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The Best Way to Play Tesla Shares Now

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Tesla’s (NASDAQ.TSLA) meteoric rise has been nothing but remarkable. It is hard to believe that revenues in 2012 were not even close to $1 billion ten years ago.

The revenue has risen and 2021 saw an increase of 71% over 2020. With 81% sales growth year-over-year, Q1 2022 was even better.

As the company grows, margins are rising which is a great sign of future profits. Tesla isn’t sacrificing profits to grow its business – this is a good sign.

The company is also increasing vehicle production and delivering more vehicles.

Concern is growing about supply chain issues at the Shanghai plant. China’s lockdowns have also not helped. These issues are well-covered on Seeking Alpha as well as elsewhere.

The news seems to be mostly positive on the surface. However, it is impossible to judge the stock in isolation. Stock is falling and investors might want to consider some issues before purchasing the stock.

Visit our site for the latest Tesla stock forecast.

Tesla stock could be hurt by distractions like Twitter

It has been a huge story about Elon Musk’s attempt to buy and privatize Twitter (TWTR). This is what I wrote about recently. This deal has become a daily titt-for-tat. It is strange that businesspeople feel the need for constant public disclosure of the deal’s inner workings, which is yet completely in harmony with the overall Twitter dynamic. It’s mildly entertaining. It’s tiresome. It’s likely not good for Tesla stock.

This issue could be even more serious. Many wonder if Musk’s wandering eye is a distraction that could affect Tesla’s leadership. This is a great time to focus on Tesla and push it to the next level. Competition is inevitable.

Musk clearly has heard these concerns when he tweeted recently that Tesla is “on my mind 24/7”. This is a worrying fact. It doesn’t matter if this is true, but the impression that a leader of a company is not focused can be detrimental. It is not necessary to question whether Tim Cook and Satya Nadella are fully engaged as the CEOs of Apple (AAPL), and Microsoft (MSFT).

There are also other rumblings. Tesla was removed from the S&P 500 ESG Index. This isn’t a huge deal. This news would only register with a small fraction of investors if it was left alone. Musk responded to this non-story with a tweet.

An investor worth billions and one of Tesla’s largest shareholders calls for an “immediate” announcement of a stock purchaseback program. This doesn’t exude confidence.

Finally, Friday’s news brought out the story of a female flight attendant who was allegedly compensated to settle a sexual misconduct claim. Musk immediately responded to his defense with a provocative tweet. This is not a detailed explanation, as the facts are undisputed. It is a distraction.

These may not have any impact on Tesla’s performance individually, but there is a lot of drama and uncertainty, which the stock market hates. We often say in sports that there is “too much noise around this team.” This means that the team is talented but distractions and underperformance are caused by the off-field drama.
Is inflation more important than rising gas prices?

Wait. These aren’t the same thing? Rising gas prices are a major contributor to consumers’ increased costs. High gas prices may encourage people to switch to electric cars, but rising gas prices, which include gas, can affect consumers’ ability afford new cars. It’s like a tug-of-war between rising electric demand from high gas prices and lower consumer spending because of inflation. As you can see, inflation is more severe.

Many people will just keep their current vehicles for longer. These vehicles could have very low-interest payments, or even be paid off. Below is a great indicator of consumer spending: consumer confidence has fallen.

Is Tesla’s competitive advantage being eroded by competition?

For years, the auto industry has been far behind electric vehicle development. Tesla is making big in a sector that has stuck with its legacy products for many years and only devoted token expenditure to electric vehicle R&D.

Tesla is being challenged by a variety of fully electric vehicles made by multiple manufacturers. Ford (F) will invest $22 billion in the next few years to electrify large portions of its fleet. Bloomberg reports that Mercedes-Benz (OTCPK :DDAIF), Volkswagen, and Ford all have targets to electrify at least 40% of their U.S.-based sales by the end of this decade.

General Motors (GM), has a goal to have an all electric fleet by 2035. The list goes on. These days, Tesla is no longer the only all-electric company in town.

The number of electric vehicles and trucks purchased by consumers will skyrocket as well, which will lead to a wider market. Tesla is not going to be destroyed by competition. Not even close. It will take focus and determination to maintain its outstanding performance.

Bottom line

In August, Tesla will host its shareholder meeting. The company intends to allow another stock split. Last time that the company announced a stock splitting, shares skyrocketed and then crashed again in the days that followed.