Tesla Motors Inc (NASDAQ:TSLA) is a great company, there’s little doubt about that. Investors tend to like investing in companies they can believe in. It keeps them interested, and it gives them rewards beyond the monetary. Tesla is a company that investors can believe in, but that doesn’t mean that investors should buy into the stock at any price.

Tesla Motors

A certain amount of traders have learned this lesson in recent weeks. Tesla Motors Inc (NASDAQ:TSLA) stock has deflated over the last month. The stock has lost more than 24% of its value in the last 30 days, and has continued to decline. It’s now trading at a level not seen since August.

Tesla stock problems

There are huge problems with Tesla Motors Inc (NASDAQ:TSLA) stock. The company is going to sell just over 20,000 cars in 2013, but the market valued it at more than $20 billion just one month ago. Investors are still pricing a massive amount of growth into the company’s stock, but the risks inherent in its business model are becoming more clear.

Tesla Motors Inc (NASDAQ:TSLA) is just about the least diversified company out there, and it’s operating in a market full of competitors. The company has just one product, the Tesla Model S. The disadvantages of “eggs in one basket” have become clear in recent weeks. A certain amount of the drop in the company’s shares comes from worries that stories of fires in the vehicle may harm the company’s brand.

That brand has become close to a household name in recent months, but it does not have much sticking power. Tesla Motors Inc (NASDAQ:TSLA) has not been around long enough for the brand to matter all that much. The company may be in the news, but that can be flash-in-the-pan.

Tesla Motors Inc (NASDAQ:TSLA) has a reasonably weak brand, its moat is not as strong as some people assume, and its lack of diversification could kill it in a single blow.

Tesla investment problems

Tesla Motors Inc (NASDAQ:TSLA) is a growth stock. It’s value is based on speculation about its future. Investors should stay away from the narrative and concentrate on the numbers in order to make an investment decision. If investors are investing in the company because they believe in it, they are doing so for entertainment, much like backing a horse.

The numbers are difficult to decide on. There are some key ones for Tesla Motors Inc (NASDAQ:TSLA). Earnings and revenue aren’t all that important, but the numbers that decide them are.

The most important number for the company is its car sales. Investors need to know that demand is going to be high enough to support the Generation 3 Tesla.

The second most important figure is gross margin. Tesla Motors Inc (NASDAQ:TSLA) is promising huge margins, and it needs to keep on track to get there.

Costs, related to gross margin, are also very important. If Tesla cannot keep costs in control it is not worth investing in.

Investors will have to weigh the costs and risks of investing in Tesla Motors Inc (NASDAQ:TSLA) for themselves, but it is important for them to stay away from betting on the story. That’s what has lost people so much money in the last month.