Should You Take A Leap Of Faith With Tesla Motors Inc (TSLA)?

Although you might like the idea of investing in a company that makes our society more sustainable and gives the opportunity for major gains, you may worry about its volatility. The chart of Tesla’s stock price over the past few years has steep clefts and troughs, which may push investors away. Currently, the stock’s P/E multiple is estimated to be 90.7 on a forward basis. Also, cash flows are unpredictable, but many predict improvements in Tesla going forward as its cash flows normalize and its products catch on.

Tesla is expected to turn profitable in 2016 and Morgan Stanley predicts that Tesla’s stock price will double by year-end based on the emergence of the Model X and other battery products. Elon Musk has stated that he expects his company to disrupt the auto industry so much so that Tesla could reach Apple’s market cap within ten years. Although Musk has failed to meet goals in the past and it is expected that Tesla will spend much of their raised funds, the company could provide shareholders with plenty of returns in the long run. The company may set its standards too high at times, but it has always delivered big at some point with the leadership of Musk.

Tesla is certainly at the pinnacle of high-risk, high-reward stocks. Risk-averse investors may turn away, but Tesla is a unique company that always performs well and finds ways to make patient investors happy. Like the expected turn to profitability in 2016, NASDAQ shows EPS of $2.00 next year, along with earnings growth of 175%. If you’re willing to take a leap of faith with Tesla while the stock price is down, the company could provide major returns down the road.

Disclosure: The author does not own any shares of TSLA or other securities mentioned.