7 Tesla (TSLA) Risks That Investors Can’t Ignore

Give credit where it’s due.

Brenner, Italy - May 8, 2016: Tesla charging stations are located throughout EU to accommodate owners of the electric car.
(Image credit: Getty Images)

Give credit where it’s due. Tesla Inc. (TSLA, $300.84) CEO Elon Musk, through sheer willpower and persistence, has mainstreamed the idea of electric vehicles. EVs were a fringe project taken on by only a handful of organizations a few years ago; now, every major automaker has entered the EV market. Tesla, meanwhile, has become synonymous with this kind of car, and TSLA stock has firmly grabbed Wall Street’s attention.

But Tesla’s journey hasn’t always been pretty. Sometimes, it has been downright ugly. Musk has led Tesla to the EV fore … but also into operational challenges and publicity headaches. He often overpromises and underdelivers. He’s distracted by leading his other companies, Boring and SpaceX.

Never even mind his penchant for getting Tesla ever deeper into debt, and his company’s extreme difficulties in turning a profit.

On the upside, Tesla’s earnings report on Wednesday, Aug. 1, hints that the company and Musk finally are moving in a healthier direction. In his quarterly comments to shareholders, Musk said that in the second half of this year, he expects Tesla “to become both sustainably profitable and cash flow positive.” Wall Street was encouraged, driving TSLA stock almost 10% higher before the next day’s trading commenced.

Here's a look at seven of Tesla’s potential pitfalls that deserve closer inspection. Just one of these issues could prove to be the company’s undoing. A more plausible outcome is that a combination of these impasses slowly chips away at Tesla’s current leadership of the electric vehicle market. If nothing else, even the most ardent bulls should be aware of these factors as potential risks.

Data is as of Aug. 1, 2018.

James Brumley
Contributing Writer, Kiplinger.com
James Brumley is a former stock broker, registered investment adviser and Director of Research for an options-focused newsletter. He's now primarily a freelance writer, tapping more than a decade's worth of broad experience to help investors get more out of the market. With a background in technical analysis as well as fundamental analysis, James touts stock-picking strategies that combine the importance of company performance with the power of stock-trade timing. He believes this dual approach is the only way an investor has a shot at consistently beating the market. James' work has appeared at several websites including Street Authority, Motley Fool, Kapitall and Investopedia. When not writing as a journalist, James works on his book explaining his multi-pronged approach to investing.