After hitting a high of $291.42 on Sept. 4, Tesla Motors Inc. (Nasdaq: TSLA) stock has fallen sharply. In just six weeks, the TSLA stock price has dropped 24.8% at yesterday's (Thursday) low of $219.10.
But this sell-off is not a panic signal. In fact, it's a buy signal.
You see, Tesla is one of the most volatile stocks on the market. The company and Chief Executive Officer Elon Musk are pioneers in the electric vehicle industry, which is viewed as revolutionary by supporters and as impractical by detractors. When news breaks that supports either side of the argument, the stock sees huge price swings.
Seemingly every week the stock makes a major move depending on what type of news comes out about the company.
Last week, TSLA stock dropped 5% last Friday after the company announced new upgrades to the Model S sedan. At a public event, Musk detailed the car's new "dual-motor," which allows the car to go 0 to 60 mph in 3.2 seconds. The car will now have all-wheel drive technology and an "autopilot" feature that can read road signs and adjust speeds accordingly. The car can also park itself.
Apparently, that wasn't enough to please shareholders.
But it hasn't been all Tesla headlines that have sent the stock down this month.
The markets in the midst of a sell-off, with momentum stocks hit the hardest. In the past month, the Nasdaq has dipped 7.4%, while the S&P 500 and Dow Jones Industrial Average have slipped 6.9% and 6% respectively.
Worried investors may be fleeing the markets, but at this discounted price, TSLA is looking more and more attractive.
In fact, the long-term case for TSLA stock is extremely bullish...
TSLA Stock's Long-Term Potential
First of all, we need to set the record straight. TSLA stock is not a short-term investment.
Because of those wild swings, Tesla is not for everyone. Investors turned off by short-term risk will want to stay away because predicting the day-to-day swings for the stock are nearly impossible.
But for those willing to take on some risk, TSLA is an excellent long-term option.
Right now, there are several bullish catalysts that should send TSLA much higher in the next several years.
First is the Tesla Gigafactory.
"The announced plans for what Tesla is calling a Gigafactory mean that the company is pouring resources into slashing battery costs like never before," Money Morning's Chief Investment Strategist Keith Fitz-Gerald said. "This 10 million square-foot factory will have a price tag of $5 billion... hefty, you might say, for a company whose earnings were less than half that in 2013.
Tesla's timeline calls for construction to begin by the end of 2014. The plant is expected to be operational by 2017 and reach maximum output capacity by 2020. The final goal for the Tesla Gigafactory is to be able to supply power for more than 500,000 vehicles annually.
"But the juice is worth the squeeze. That's because the Gigafactory will be a pioneer in mass production of cost-effective and high-quality battery packs that will give Tesla an even deeper competitive edge over its competitors going forward. It's going to be the largest lithium-ion battery manufacturing plant in the world."
Another factor that sets TSLA apart is Elon Musk himself...
"You hardly ever see this recognized in the mainstream media, but Tesla has one irreplaceable asset that also happens to be its greatest advantage over its competitors," Fitz-Gerald said. "The company has been blessed with the most innovative CEO on the planet: Elon Musk."
"Creativity as a thinker who can't be boxed in by entrenched competitors, the ability to cheerfully put tens of millions of his own money behind his vision when necessary, a solid grasp of what technology means for the industry he operates in... all of these are great qualities in a CEO. Any company, big or small, is lucky to have a chief executive with just two of them. Tesla has all three in Elon Musk."
After this month's sell-off, Tesla stock is trading near $230 per share. It's still up more than 580% since January 2013.
Editor's Note: The only drawback for TSLA stock is the $230 price tag that comes along with it. But Fitz-Gerald has found a way for investors to profit from Tesla's massive potential, at a fraction of that $230 per share cost. Here's how...