Tesla | Fundamental Analysis | Must Read !

The auto industry is clearly transitioning to electricity, and every major automaker is actively promoting electric vehicles (EV). However, Tesla is the one that has really moved in this direction, and investors couldn't help but notice it.

Here are three reasons why investors might want to invest in Tesla stock, and one important reason why you might not.

First, Tesla has a strong focus on the transition to clean energy.

Tesla is, in fact, the leading manufacturer of pure electric vehicles. There are other companies in this niche, but Tesla has long been the leader. And so far, it's turning a profit, with positive profits in each of the last five quarters. For years, the company has essentially just been burning through money. However, despite selling only 240,000 vehicles in the third quarter, the company has made an important turnaround. By comparison, Ford sold four times as many cars in the quarter. Thus, Tesla remains a minnow, but that's just fine if it's making money.

The key difference is that Ford and companies like it are trying to balance the transition from gasoline to electricity. Tesla doesn't have to do that. In addition to cars, Tesla is also involved in solar energy and battery technology. So the company has more room to grow as renewable energy technology comes to the masses, and it has a very loyal customer base to which it can sell other products. Thus, it looks like Tesla may end up being a broader player in the clean energy market for those with a penchant for ESG.

Furthermore, TSLA has visionary leadership.

Tesla is the brainchild of Elon Musk. He is sometimes compared to Tony Stark in the Iron Man comic book series, suggesting that he is a wealthy genius do-gooder. This characterization is debatable because he has a team of experts who help him create electric cars and the technology behind them, but what is quite obvious is that he knows how to promote the company he runs. And what he has created is quite impressive. Although he has a habit of sometimes overreaching in advertising, it's been a net positive so far, and there's no reason to expect that to change. Many investors own shares in the company thanks in part to Musk.

And of course, Tesla has a lot of room for growth.

Hyper-focusing on a growing industry niche with a visionary leader at the helm. There's a lot to like in that description. What's interesting, however, is that if Tesla can maintain its credibility in the industry, it will have many opportunities to get ahead of older competitors who just don't have that image. Go back to the sales figures in point #1, where it was noted that Tesla sales are less than a quarter of Ford's sales. And Ford is just one of many big global car companies that Tesla can wrest market share from by being cooler and more attractive. General Motors, for example, sold 1.3 million or so vehicles in the third quarter. Yes, both companies are eager to grow their EV businesses, but their dominance in the gasoline car market doesn't necessarily give them an edge in the EV space, where the Tesla brand is often the main one. Indeed, the playing field for EVs is much flatter, and Tesla has already proven that it can compete effectively with the industry's largest automakers.

The big problem with Tesla, which investors should think hard about, is valuation. There are several ways to look at it, but the most shocking is market value. Tesla's market value is about $1.1 trillion, compared to $77 billion for Ford and $89 billion for General Motors. It is shocking because, going back to the sales figures above, Tesla sold less than a quarter of the cars sold by Ford or GM in the third quarter. How can it be worth more than ten times as much as each of those two companies? Even with all the room for growth in the coming years, there is a lot of good news embedded in Tesla stock today.

Investors who have risen on the stock should probably consider picking up some of the money. The stock price has doubled in the last year alone. And that's with the recent volatility around Musk's stock sales. That doesn't mean you should sell all the stock you own, but prudence suggests it makes sense to lock in some profits. You might be able to use the cash to diversify your portfolio, which might be a little overwhelmed by Tesla stock, given its huge 1,200% increase since January 2020.

Nothing lasts forever, and Tesla's huge market capital compared to its peers is likely to change at some point. The company may produce great electric cars, but it hardly owns the electric car market. And that will likely lead to an eventual revaluation of the stock.

And if you haven't already bought Tesla stock, it's probably best to leave it on your wish list for now, if you have the slightest inclination to value valuations

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