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Tesla stock surges 20% in a day. Is the EV maker a good US share investment?

Image source: Tesla

After a share price rout, electric carmaker Tesla (NASDAQ:TSLA) bounced back yesterday. In the biggest one-day surge it saw in over a year, it leapt 20%+. This was partly thanks to a turn in the overall market, an upgrade from a Wall Street analyst, and because it reported higher Chinese sales for February. 2020 sales in China more than doubled to $6.66bn.

But the Tesla share price is still 25% below its January high.

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Tesla is a US stock like no other

In 2020, the Tesla share price rose around 740%. No mean feat at the best of times, but during a pandemic, astounding.

I see a lot to like. Apart from stylish electric vehicles, it has a solar powered home division, and it’s making strides in its use of artificial intelligence to power autonomous vehicles. I think there’s future potential in all these areas as the world advances. Therefore, I believe Tesla is here to stay and has a strong chance of being successful far into the future.

It’s also got a charismatic leader in Elon Musk. Love him or hate him, there’s no CEO like him. And he’s also a huge part of the reason for the firm’s stock market success.

However, there’s a lot of speculation and hype built into the Tesla share price. It’s definitely not one for the faint of heart.

Bears vs bulls

Over the years, the company has split opinion between investors and analysts. Some have gone all in with bullish fervour while others steer clear. It’s become a main holding in many funds and brought riches to those who’ve held their ground. However, the recent correction in US tech stocks has given cause for concern and some big funds are pulling back.

Billionaire investor Ron Baron is a Tesla bull who believes its share price will surpass $2,000 in the next decade. However, his firm, Baron Capital, sold 1.8m shares in Tesla over the past six months because they were becoming an overpowering percentage of some of its portfolios. But it still held over 6.1m Tesla shares at the end of February.

Controversy and carbon credits

Tesla has become profitable in the past year and was admitted to the S&P500 in November. Many didn’t believe it was deserving of its high valuation, however. But it earns a lot of its income from carbon credits. By producing electric vehicles, it reduces its emissions and earns credits, which it then sells to companies producing high emissions. This includes rival carmakers.

Carbon credits provide companies with a regulatory route to becoming carbon neutral. But if this system is cancelled or changed, then Tesla’s value could plummet. In the fiercely competitive car industry, an operating margin of 5% could fall to 1% without carbon credits.

With the Biden administration in place, it doesn’t look like there’s any risk of this happening soon. If anything, Tesla could benefit further from the renewables-focused regime change. However, it’s important to understand all the wheels in motion and that there are external risks to the share price.

The company again shocked investors last month when it invested $1.5bn in Bitcoin. This week’s bitcoin rally could also be helping the Tesla share price, although a fall in Bitcoin’s value could hurt it..

But overall, I like the company’s long-term vision and would happily own Tesla stock in my portfolio.

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Kirsteen owns Bitcoin. The Motley Fool UK owns shares of and has recommended Tesla. The Motley Fool UK has recommended Bitcoin. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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