Is Tesla stock now a brilliant long-term opportunity?

However else one may describe the share price movements of Tesla (NASDAQ: TSLA), boring is not an adjective that springs to mind. Tesla stock has halved in value since a December high. But that still leaves it 381% higher than it was five years ago.

I would be delighted if I put £10,000 into a share and five years later was sitting on a shareholding worth £48,000. I have never owned Tesla stock, but could now be the time to add it to my portfolio? After all, I would now be able to buy two shares for the same amount an investor would have paid for one just four months ago.

Is Tesla misunderstood – or very well understood?

That sort of price fall does not happen for no reason, especially for a company of Tesla’s size. Despite the recent share price crash, it still commands a market capitalisaion of $757bn.

Clearly, the wild price swings we have seen in the stock are not based wholly on the business’s commercial performance.

Momentum has a lot to do with the situation in my view. Risks such as tariffs and brand damage due to the chief executive’s high political profile have had a role to play in turning former fans of the stock into sceptics.

But I am still not convinced the market fully understands Tesla.

Is it primarily a car company struggling even to maintain sales volumes in an increasingly crowded market? If so, the $757bn market cap looks ludicrously high to me.

Or is it the sort of once-in-a-generation innovator that will disrupt multiple huge and potentially lucrative industries from power storage to taxis? In that case, the ultimate value of Tesla could be much higher than its current stock price suggests.

This looks like a high risk, high reward opportunity

The simple answer is: I do not know. Only time will tell.

So, like any investor, all I can do is make a value judgement based on the infromation available to me at the moment.

Based on that, I recogise the potential the business has. It could mean today’s stock price may ultimately prove to be a brilliant long-term buying opportunity for my portfolio. Tesla has a large installed user base, proprietary technology, and is carving out a position in markets with huge potential.

For now, however, a lot of that remains in the future. It may be far in the future — and whether it ever arrives at all remains an open question.

It is not just the uncertainty about how well the business’s expansion plans will end up doing. There are also considerable risks facing the existing business. Buying Tesla stock today could end up as a rewarding move for me, but the risks are larger than I am willing to accept, so for now I will not be adding it to my portfolio.

The post Is Tesla stock now a brilliant long-term opportunity? appeared first on The Motley Fool UK.

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C Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesla. 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.