<div id="readability-page-1"><p>For many investors, buying <strong>Tesla</strong> <span>(TSLA<span> 3.85%</span>)</span> has already set them up for life, but will that be true for anyone newly buying into the stock now? Here's a look at what you need to know before buying the stock.</p> <h2>Understanding the investment thesis for Tesla stock</h2> <p>Tesla is an unusual stock, known to most investors primarily as the leading electric vehicle (EV) company, but that isn't the primary value driver of the stock. Indeed, if you look at Tesla solely as a car company, you would likely avoid the stock. Let's put it this way: Tesla currently trades at a price-to-earnings multiple of 192, compared to single-digit multiples at car companies like <strong>Ford Motor Company</strong> and <strong>General Motors</strong>. </p>  <p>The valuation discrepancy doesn't stem from Tesla's superior profit margins or its leading position in the electric vehicle market. Instead, it comes down to Tesla being able to do something that rival car companies haven't yet done or have abandoned trying to do: launch a robotaxi service. General Motors has already abandoned robotaxi development, and Ford (which had planned to have a robotaxi service in place by 2021)  ended its investment (alongside <strong>Volkswagen</strong>) in robotaxi company Argo AI in 2022.  Volkswagen plans to launch its robotaxi service in 2026. </p> <p>So, if Tesla's valuation isn't justified in terms of being a highly successful electric vehicle company, then how should it be viewed?</p> <p>The following key points apply, and they make Tesla a highly attractive stock for the speculative end of your portfolio:</p> <ul> <li>The value in Tesla lies in its robotaxi business; this is not purely a car company stock, or even an electric vehicle stock, and its valuation reflects that.</li> <li>The reliance on robotaxi/full self-driving (FSD) makes it a speculative growth stock.</li> <li>Tesla's installed base of vehicles gives it significant advantages over Waymo and others.</li> <li>Tesla is not your average speculative growth stock; it holds significant advantages over typical growth stocks.</li> </ul> <div><p><img src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MjA1ODkvZXYtZWxlY3RyaWMtdmVoaWNsZS1jaGFyZ2luZy1jaGFyZ2UtcG9ydC0xMjAxeDgwMC01YjJkZjc5LmpwZyZ3PTcwMA?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="700" height="466" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MjA1ODkvZXYtZWxlY3RyaWMtdmVoaWNsZS1jaGFyZ2luZy1jaGFyZ2UtcG9ydC0xMjAxeDgwMC01YjJkZjc5LmpwZyZ3PTcwMA"/></p><p>Image source: Getty Images.</p> </div> <h2>Why robotaxis matter and why Tesla isn't your average growth stock</h2> <p>The robotaxi concept and the FSD that powers it are potentially a huge earnings driver for Tesla. One of Tesla's most vocal and visible supporters, Cathie Wood's Ark Invest, which expected a valuation of $2,600 per share for Tesla in 2029, relies on a model that prescribes 88% of the company's value from robotaxis, compared to just 9% from EVs. </p> <p>The opportunity to earn recurring revenue from selling unsupervised FSD subscriptions to Tesla owners wanting to use their vehicles as robotaxis is massive, as is the potential to generate recurring revenue on a ride-per-mile basis from robotaxis. Moreover, Tesla plans to mass-produce its dedicated robotaxi vehicle, Cybercab, next year.</p> <h2>A speculative growth stock</h2> <p>That said, the robotaxi launch hasn't even taken place yet (it's scheduled for June 12 in Austin), and it will only be on a small scale initially. As such, Tesla<em> is</em> a speculative growth stock, an observation that suggests Tesla stock should be filed on a long list of highly speculative investments to consider on a rainy day.</p> <div><p><img src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MjA1ODkvZ2V0dHlpbWFnZXMtMTEyNTg5NDQ3NS0xMjAxeDgwMS1kMjFiNDVkLmpwZyZ3PTcwMA?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="700" height="467" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MjA1ODkvZ2V0dHlpbWFnZXMtMTEyNTg5NDQ3NS0xMjAxeDgwMS1kMjFiNDVkLmpwZyZ3PTcwMA"/></p><p>Image source: Getty Images.</p> </div> <h2>Why Tesla deserves a place in a balanced portfolio</h2> <p>However, there are differences -- in fact, many differences -- between Tesla and typical growth stocks. First, speculative growth stocks are usually not established leaders in the core business that underpins their growth. The Model Y is not only the best-selling electric vehicle (EV) in the world, but it's also the best-selling car in the world. In other words, Tesla already has a compelling brand and is the market leader in the growth area of the auto market.</p> <p>Second, this is not a struggling small-cap stock desperately trying to establish brand recognition and promote its new technology to a sceptical marketplace. Waymo has offered a robotaxi service since 2018, and there is little doubt that consumers want to use robotaxis.</p> <p>Third, Tesla isn't a growth stock struggling with its finances and seeking a larger partner to invest, which would dilute existing shareholders' claims on future cash flows. A quick look at its most recent balance sheet  reveals $37 billion in cash and equivalents, alongside $7.5 billion in debt and finance leases, resulting in a net cash position of $29.5 billion. </p> <div><p><img src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MjA1ODkvcmVsYXhlZC1pbnZlc3Rvci13YXRjaGluZy1zdG9ja3MtYW5hbHlzdC0xMjAweDgwMC01YjJkZjc5LTEuanBnJnc9NzAw?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="700" height="467" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MjA1ODkvcmVsYXhlZC1pbnZlc3Rvci13YXRjaGluZy1zdG9ja3MtYW5hbHlzdC0xMjAweDgwMC01YjJkZjc5LTEuanBnJnc9NzAw"/></p><p>Image source: Getty Images.</p> </div> <p>Finally, Tesla's position as a cost-effective automaker with the capacity and scale to ramp up production and the vehicles on the road means it can produce robotaxis (whether Cybercab or existing Tesla models) to support growth, and it has a vast bank of data from Tesla vehicles to use to improve its FSD capability.</p> <p>All told, Tesla is speculative because its robotaxis haven't even been launched yet, there's a lot more certainty around the company than in most growth stocks. That makes it worth buying for the risk-seeking end of a portfolio.</p>                                                                            </div>

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<p>Tesla's stock is viewed as a speculative growth investment, primarily due to its potential robotaxi business, which could drive significant earnings. Unlike traditional car companies, Tesla's valuation reflects its unique position in the market, with a price-to-earnings ratio of 192. The company is expected to generate substantial recurring revenue from its full self-driving subscriptions and robotaxi services. Despite the speculative nature of the investment, Tesla's strong market position, financial health, and established brand make it a compelling option for a balanced portfolio.</p>

- Tesla's stock is primarily driven by its potential robotaxi business rather than its electric vehicle sales, which are not the main value driver.  
- The company is positioned as a speculative growth stock, with significant advantages over competitors, including a strong brand and financial stability, despite the robotaxi service not yet being launched.  
- Investors are encouraged to consider Tesla for the speculative portion of their portfolios due to its unique market position and potential for recurring revenue from robotaxi services.

Could Buying Tesla Stock Today Set You Up for Life?