SolarCity was at the forefront of the solar energy industry after its founding in 2006. Tesla Inc. (NASDAQ: TSLA) bought the company in 2016. SolarCity is now a wholly-owned subsidiary of Tesla, so instead of buying SolarCity stock, you’ll need to purchase Tesla instead.
SolarCity Stock Performance and Company History
Founders Peter and Lyndon Rive have some excellent family connections. Their cousin, Tesla founder Elon Musk, financially backed the brothers so they could start the company.
The company held its initial public offering (IPO) in 2012 and listed its stock under the symbol SCTY on the NASDAQ exchange. The IPO price of $8 per share raised $92 million after the company issued 11,500,000 shares for public sale.
In August 2016, Tesla and SolarCity issued a joint statement announcing Tesla’s acquisition of the company in an all-stock deal worth $2.6 billion. The deal was green-lighted by regulators and was voted on and approved by Tesla and SolarCity shareholders on November 17 just prior to the deal’s closing on November 21, 2016. SolarCity shareholders received 0.11 Tesla shares for each SolarCity share they owned.
The Rive brothers left the company in 2017 along with many other employees. The company’s model has also changed to an online presence fully integrated with Tesla’s line of cars and batteries. SolarCity has been slowly taken apart since its Tesla acquisition and its focus stayed on its car and battery businesses.
In August 2019, Tesla announced it would begin renting solar systems to customers in 6 states at $50 a month. The solar panels are now sold under the Tesla brand. In July 2020, Tesla claimed "Tesla Solar is the lowest-cost solar in the United States" with a price of $1.49 per watt for solar panels when including federal tax credits.
Future Outlook for Tesla Inc.’s Subsidiary SolarCity
The solar energy industry has grown considerably in the past 2 decades. It now comprises a major part of the energy sector. Converting sunlight to electricity can be done by using photovoltaics (PV), concentrated solar power systems or a combination of both.
PV capacity has also been growing significantly over the past 19 years. Despite SolarCity’s secondary status to Tesla Inc.’s car and battery operations, the market for solar installations continues to expand as more people want to go off the grid for their energy need
Tesla’s stock has managed to reach impressive levels despite the company’s failure to show a yearly profit so far. When Tesla stock traded its all-time high of over $380 per share in June 2017, the company reported a loss of -$4.72 for the quarter.
Companies with cutting-edge technology eventually begin earning money after a few years but Tesla has remained mired in debt. A sharp market downturn means that investors could find it difficult to justify Tesla’s currently high stock price of $235 per share.
Furthermore, financials released by the company’s for its 2019 second quarter showed Tesla had increased its debt even further by publicly selling $2.4 billion in equity and convertible bonds that left it with a cash position of $5 billion, its highest ever.
The company also reported a Generally Accepted Accounting Principle (GAAP) operating loss of -$167 million and a net GAAP loss of -$408 million, including -$117 million in restructuring costs and other charges during the same quarter.
Source: www.macrotrends.net
You might want to research other stocks in the sector if your objective is to invest in renewable energy stocks. Tesla Inc. is primarily an electric car and battery company rather than a green energy company at this point.
Why You Might Want to Buy it
Here are a few reasons to consider adding TSLA to your stock portfolio.
- You want to invest in Tesla Inc. Probably the best reason to want to buy Tesla Inc. stock is not just to invest in SolarCity, but to invest in Tesla. The company is still not making a profit, but it could eventually turn into a profitable company or get sold to or taken over by another company.
- A bullish outlook on the U.S economy and stock market. Holding Tesla Inc. stock would be most profitable during an economic expansion accompanied by a rising stock market. Other key factors that might contribute to the stock’s appreciation are its battery manufacturing and solar panel production.
- Tesla expected to report a profit. Tesla Inc. could eventually report consistent profits on a quarterly basis. The company might split the stock or begin distributing dividends.
Considerations Before You Buy
Before you go ahead and buy TSLA, let's look at a few precautions about buying this stock.
- U.S. stock market and/or economic decline. A sharp decline in the stock market or an economic downturn could severely affect the stock price and profits of a company like Tesla. Tesla Inc.’s rather high stock price could fall even more than the general market due to the company’s debt-laden financial position.
- Tesla stock price. Tesla stock might not be much of a bargain at its current stock price. While this may change if the company releases an interesting new technology, there’s a good chance the stock may be under pressure for a while.
- SolarCity is not a pure energy play. Tesla’s acquisition and dismantling of SolarCity means you’re not really investing in a renewable energy company but in an automobile and battery manufacturer. You might be better off finding another company to invest in if you really want to invest in the green energy sector.
How You Can Buy Tesla Inc. Stock Right Now
Buying Tesla stock means that you must 1st have a funded brokerage account open with a stockbroker that has access to NASDAQ-traded stocks. Take the following steps to obtain an account and fund it if you don’t already have an account.
- Pick a Broker
Determine what you want from a broker before you commit to an account. Keep in mind that how you buy Tesla Inc. stock is just as important as where you trade, so make sure you pick the right broker.
You might choose a broker with access to international markets, such as Interactive Brokers or Charles Schwab.
You might want to consider E*TRADE if you need a bank with your trading account.
Robinhood is a decent option if you are looking for commission-free trading.
You might want to open an account with Fidelity Investments if you’re interested in mutual funds in addition to individual stock trades.
You can find a few of our favorite online stock brokers below. - Trade in the Broker’s Demo Account
Most online stock brokers provide prospective clients with a virtual or demo account. This account gives you access to real-time market trading without risking actual money. A demo account can be especially useful for practicing short term trading strategies and to evaluate a broker’s services and trading platform.
You can open several demo accounts with different brokers to see which trading platform and services best fit your needs. Once you feel you’ve found the right platform and broker, open up a live trading account and fund it. - Fund Your Trading Account
Make a deposit into a trading account to buy TSLA stock. Make sure you check with the broker about how to make deposits, since broker requirements can vary substantially. Most will take bank wire transfers and personal checks.
- Buy TSLA Stock
TSLA can trade with considerable volatility due to its rather high price and fluctuating underlying fundamentals, so if you didn’t already watch the stock trade in the demo account, you might want to keep an eye on it for a couple of sessions and perform some technical analysis to determine the best level to buy.
Recommended Online Stock Brokers
- Best For:Active and Global TradersVIEW PROS & CONS:Securely through Interactive Brokers’ website
- Best For:Global Broker for Short SellingVIEW PROS & CONS:securely through TradeZero's website
Is Buying TSLA Stock for You?
Is your original intention to invest in the renewable energy sector? TSLA stock could fill the bill because Tesla Inc. is primarily an electric car and battery maker with several other subsidiaries.
Tesla might someday sell its SolarCity energy unit, dismantle it or develop it further. Many stock market professionals actively trade and invest in TSLA stock, but some analysts refuse to recommend the stock to serious investors and place Tesla’s stock in a “high risk” category. You might be better off actively trading the stock than investing in it.
A well-defined short term trading strategy could work well with a stock like TSLA, including day trading. You could also use a technical trading strategy like establishing long trades ahead of support levels and sell the stock ahead of resistance, for example.
Option strategies could also be a profitable way to trade TSLA stock, although spreads and risk reversals might make more sense than just buying options due to rather high implied volatility levels. Options also seem significantly more affordable than buying or shorting TSLA stock, although options trading may require more research and training to develop a winning strategy.
Interested in building out your stock portfolio? Check out Benzinga's guides on how to start investing stocks, how to create an investment strategy, and take a look at the best online stock brokers for beginners.
Frequently Asked Questions
What are the benefits of investing in electric vehicles?
The major benefit is the demand for electric vehicles is expected to rise dramatically. Cairn Energy Research Advisors, a research firm focused on the battery and EV industries, predicts 36% growth in electric vehicles sales in 2021.
Right now, electric vehicles only account for 3% of all passenger cars. The market is slated for growth, so an investment is slated for profit.
Are there other electric vehicle companies to watch beyond Tesla?
Tesla is the big name in electric vehicles, but the market abounds with companies ready to meet consumer demand. Benzinga can help you stay up-to-date on the electric vehicle market. Check out our current news that features electric vehicle happenings, and subscribe to BenzingaPro for faster stock market news and research.
Are SolarCity and Tesla the same company?
SolarCity has been a subsidiary of Tesla since 2016.
Are the high prices of Tesla’s stock a reflection of its ownership of SolarCity?
Tesla’s stock is increasing because of the popularity of its EVs and CEO Elon Musk.
Read also: BEST GREEN ENERGY STOCKS
About Luke Jacobi
Luke Jacobi is a distinguished professional known for his role as President at Benzinga, a renowned financial media outlet. With a background in business operations and management, Luke brings valuable expertise to his position, overseeing various aspects of Benzinga’s operations. His contributions play a crucial role in the company’s success, ensuring efficiency and effectiveness across different departments. Prior to his role at Benzinga, Luke has held positions that have honed his skills in leadership and strategic decision-making. With a keen understanding of the financial industry and a commitment to driving innovation, Luke continues to make significant contributions to Benzinga’s mission of providing high-quality financial news and analysis.