Since hitting an all-time high of $900 back in January, the Tesla (NASDAQ: TSLA) share price has fallen to just over $600, although they were under $200 a year ago. With CEO Elon Musk consistently making headlines, I’m looking at whether I see potential in Tesla as a long-term pick for my own portfolio.
Uncertain times ahead
The main issue I see for Tesla in the future is competition. The best known competitor is NIO (whose potential I wrote about earlier this month). And I believe the Chinese powerhouse has the ability to seriously rock Musk’s boat. On top of this, many established carmakers are diversifying into the world of electric vehicles (EV), driven by consumer trends and looming regulations that will force more people to choose EVs. For example, Ford recently stated that by 2026 all cars sold in Europe will be ‘zero-emissions capable’, and pure electric by 2030. The competition these will provide could have significant effects on the Tesla share price.
Also, after a strong start to 2021, the current tech sell-off (explained here by my fellow Fool Dylan Hood) may mean problems ahead for the business. With investor confidence in tech stocks continuing to fall, the Tesla share price may follow suit.
Its recent venture into the world of cryptocurrency has also caused instability too. After backing Bitcoin as payment for its cars, Elon Musk recently tweeted that the firm would be suspending payment via Bitcoin – an issue that caused massive drops in the share price.
The bigger picture for the Tesla share price
With that said, I can’t ignore the positive news we’ve heard about the firm over the past year. The Tesla share price is up around 275% year-to-date – an increase that an investor like me can’t ignore.
Recent Q1 results provided a boost for the company. Total deliveries for the period rose to 184,800 – a 109% increase from Q1 last year. This is an encouraging trend for Tesla as demand continues to rise.
I can’t ignore the long-term potential this stock provides either. That $900 share price in January shows the Tesla share price has room for growth in the future. So I have to ask myself whether now is a good time to buy or could I dare to miss out on a stock whose growth trajectory might make it another Apple?
It’s no secret that the EV market is growing and will continue to expand over the coming years. This provides me with real optimism for the future Tesla share price. With this said, the expansion of the sector will naturally lead to more competition. As such, I think the growing competition could have too big an effect on the Tesla share price in times to come.
If Tesla can adapt to the expanding market, I do see long-term opportunities. However, the short-term volatility provided by the tech sell-off and potential Bitcoin saga both mean that I am opting against buying Tesla at this current moment.
Charlie Keough owns shares of Nio and Tesla. The Motley Fool UK owns shares of and has recommended Apple, NIO Inc., and Tesla and recommends the following options: short March 2023 $130 calls on Apple and long March 2023 $120 calls on Apple. 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.