Few stocks polarise investors like Tesla (NASDAQ: TSLA). The car maker has had legions of naysayers for many years – but its share price has still more than doubled over the past five years.

In fact, even since early last month, Tesla stock has soared 28%.

Could this be the start of a longer-term upwards move – and ought I to get aboard?

Tesla’s core car business faces growing competition

The past several years have presented multiple challenges for Tesla.

While headlines may focus on its boss and his impact on brand perceptions, what I see as the biggest challenge for the company is how its core marketplace is evolving.

The long-term demand trend for electric vehicles is unclear. Growth has slowed in many markets and the former belief that ultimately electric vehicles will dominate the market is now contested, even while high fuel prices due to the Middle Eastern conflict give demand a fillip.

What is clearer, though, is that however large this market ends up being, it will be tightly contested.

Chinese carmakers have been expanding globally. Indeed, BYD now leaves Tesla in the dust when it comes to sales volumes.

That remains a risk, although Tesla’s automotive revenues did show 16% year-on-year growth in the first quarter, on sales volumes up 6%. Still, Tesla’s car sales over the past several years have been very uneven and I see a risk that could continue.

Profitability problems

Meanwhile, competition and the end of US tax credits has been eating into the bottom line.

The first quarter showed year-on-year growth in net income but the bigger picture looks less positive to me. Last year’s net income (prepared using Generally Accepted Accounting Principles) was $3.8bn – a sharp fall from $7.1bn the prior year.

The first quarter figures help explain one reason Tesla stock has jumped lately, though my concern is that they represent a blip rather than a long-term trend given the competitive environment.

Cars are not Tesla’s only business but they are the main one.

The other sizeable one, energy generation and storage, saw year-on-year revenues decline 12% in the first quarter. That is not an encouraging trend.

Meanwhile, services and other revenue leapt in the first quarter, up by over two-fifths year on year. Bulls point to this as suggestive of the enormous potential of AI, including self-driving software, robotics, and driverless taxis to help propel Tesla’s revenues and earnings higher over time.

Here’s my concern

I am less convinced. Even more than electric vehicles, robotics is a crowded space and Tesla lacks the early commercial lead it had for electric vehicles.

Meanwhile, its AI and driverless taxi offering remains small scale. It remains to be seen whether it can be successfully commercialised at scale – again, in a crowded market.

Still, even recognising those risks, Tesla is profitable, with a large installed user base and lots of proprietary technology.

At the right price, I would happily own Tesla stock. But at over 400 times earnings right now, I see no fundamental reason to justify a higher price. Indeed, I think on fundamentals, it is badly overpriced.

I will not be buying. Instead I am scouring the market for other tech opportunities I think look much more attractively priced…

Should you invest £5,000 in Tesla right now?

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Christopher Ruane does not hold any position in the companies mentioned.