Tesla (TSLA) Stock: Risk-Reward Gut Check with Maximum Volatility

So...how do you feel about risk? There are investors out there who can't get enough of the stuff, and invest as Richard Branson lived for a good chunk of the last couple decades. There are others, meanwhile, who'd keep it at the barest minimum possible. For investors who crave risk, Tesla (NASDAQ:TSLA) will be the roller-coaster ride potentially leading to a massive stack of cash you've been hoping for.

Like Careening Down a Highway Covered in Vegetable Oil With No Brakes

Looking at the last year in Tesla, at first, you'd have to be concerned that the company was even alive. From July to October of 2019, Tesla traded in a tight range of about $225 to $250, never turning in any particularly high or low that didn't regress to the mean and that right quickly. It's almost a straight line, but one is drawn freehand, so it's got a few up-and-down jags in there.

But in just four days in late October, the company broke those doldrums and began a wild ride where almost every day was a new 52-week high. It got to the point where, on February 4, the company approached the $900 per share mark and people were talking very seriously about a four-figure Tesla price. They couldn't quite figure out how in the world this was happening, but it was clearly happening.

Then, of course, came March.  With it came the Massive Indiscriminate Coronavirus Sales Event that took most of the starch out of Tesla's...battery...and sank the stock price back down to levels it hadn't seen since, well, late 2019. It wouldn't stay in that so-last-year crevasse long, though, as a brief V-shaped recovery took hold. Tesla then began a long, and even more volatile, climbing not only back to its February highs, but beyond them, to the current day where a four-figure Tesla share price isn't just considered, it's full-on reality.

Does Anyone Else Smell Smoke?

“Volatility” is now the order of the day at Tesla. Record highs have once again been reached amid reports that CEO Elon Musk sent out an email rallying his employees to work even harder than normal, with talk of “breaking even” contained therein. Formerly-thwarted ambitions of getting Tesla shares listed on the S&P 500 were actually starting to look possible again, a move that would give Tesla incredible visibility and credibility in the wider market. It would also make Tesla a prime target for index funds, which could give share prices further push. The company actually managed to, briefly, land a market capitalization of $200 billion for the first time in its history.

There's a lot to like about Tesla right now. While China isn't exactly in anyone's good graces right now, Tesla's China plant has done it a lot of good, giving it a quicker return to productivity than if it had been solely operating in the US during the pandemic. Current estimates suggest that, in the second quarter, the company delivered vehicles in numbers between 83,000 and 88,000, which is impressive considering how much of the company was shut down by government mandate.

What's more, Tesla got a winning endorsement from the Bargersville Police Department in Indiana, if only indirectly; the agency replaced its patrol cars with Tesla Model 3 units, and reports that the cost savings involved might actually make the vehicles a net savings in less than two years. Considering the current situation—no pun intended—police departments are in cash-wise post-pandemic, cost savings will be the order of the day and that may prompt huge new orders.

What's Next, Aliens?

Yet Tesla's fortunes have been fickle to say the least. There's a movement led by Pirc, a shareholder advisor, to ditch Musk altogether as a $55.8 billion deal is in the works thanks to the gains in the stock price. Pirc refers to the arrangement as “excessive”, and notes that Musk himself is about as unstable as the stock price. This in turn may damage the company's reputation, not to mention that of Tesla shareholders.

Issues with the company's product line have continued to gain, as a driver who recently crashed into a police car cited Tesla's notorious Autopilot system for the crash. In support of that, a video recently emerged showing a Tesla engage in especially violent maneuvers trying to avoid hitting a deer. Things aren't much better on the shop floor, as issues of employees taking advantage of Tesla's stated “do not feel obligated (to return to work)” policy find themselves getting fired over it. 

This combination of issues, ranging from the exciting to the terrifying and every level of bizarre in between, makes Tesla a risky proposition right now. If Tesla can hold it together to get accepted to the S&P 500, it's likely a huge gain will follow. However, with the product line looking a bit concerning, the chances of complete recovery slim, a downright mercurial management team, and the growth of competitors, there are serious problems afoot for Tesla.

If Tesla can cross the finish line at the S&P 500, then this may all prove moot. But it's got a ways to go to get there, and some serious mechanical issues are cropping up.