Meme stocks? Electric-vehicle stocks? Hypergrowth tech stocks? Whatever you call it, Tesla (NASDAQ:TSLA) is arguably the granddaddy of all of them. For investors who bought early -- or even as recently as a couple of years ago -- the returns on the stock have been nothing short of astounding.

But is there more upside to come? Or is the recent dip a sign that Tesla's share price has already run too far? It's fair to say that opinions are sharply divided on this endlessly fascinating company's stock. Here, two Foolish contributors present their cases for your consideration. 

The bull case: Tesla's tech and growth still make it a buy

Rekha KhandelwalI'm not a Tesla aficionado, but I think there is a bull case for Tesla even if we look at the company objectively. Let's begin with the company's sales growth. In five years, Tesla's quarterly revenue grew at an average year-over-year growth rate of 58%. By comparison, this average rate was nearly 7% for Volkswagen (OTC:VWAGY), 5% for Toyota Motor (NYSE:TM), 3.6% for General Motors (NYSE:GM), and -1.3% for Ford (NYSE:F).

TSLA Revenue (Quarterly YoY Growth) Chart

TSLA Revenue (Quarterly YoY Growth) data by YCharts

Of course, Tesla's growth is at a much smaller base than these legacy car companies. However, looking at the customer interest in Tesla cars, there is no reason to believe why it cannot grow in terms of size to be one of the largest automakers in the world. Tesla is a global leader in electric vehicle sales, and it can continue expanding its share in this growing market.

Still, that alone would not be enough to justify its massive valuation. Market capitalization of the world's largest automakers is a fraction of that of Tesla's. Tesla's technological innovation could well be its key differentiator. The company is focused on improving the autopilot and full self-driving (FSD) features of its cars. It is expanding the beta testing of its FSD functionality to help its smooth rollout. This will help Tesla feed more data into its machine learning models and further improve the software. If Tesla could lead in FSD, with better features than competitors, its stock price could surely rise further.

Energy storage, solar deployments, and auto insurance are some of the other potential growth avenues for Tesla. In short, there are a lot of things Tesla could do to drive growth in the long term. And that could, in turn, continue to drive its stock's price higher.

The bear case: Tesla's wildly inflated valuation won't last

John Rosevear: The bear case for Tesla is pretty simple: It's wildly overvalued now, and history teaches us that -- in the long run, at least -- fundamentals drive valuation.

As I write this, Tesla's market cap is about $1.1 trillion. To justify that in fundamental terms, Tesla would have to be generating somewhere around $100 billion a year in operating profit, give or take. Alternatively, since this is obviously a growth stock, it would have to have a clear path to generating that kind of profit, year in and year out.

Can it get there selling cars? If we assume Tesla's cars sell at an average transaction price of $50,000, and that Tesla will be able to get a generous 15% operating margin once it's at scale (which would be the best of any mass-market automaker), then Tesla would have to sell a bit over 13.3 million vehicles a year to hit that operating profit number. That would make it bigger than Toyota, bigger than Volkswagen, bigger than any other automaker, ever. (And far more profitable than any other automaker, ever.) 

That isn't happening, folks.

A white Tesla Model Y, an upscale electric crossover SUV.

Tesla's Model Y is selling well, but its sales are nowhere near the level suggested by the company's valuation. Image source: Tesla.

Here's the grim reality of the auto business: Toyota and VW make up much of their global volume with simple, inexpensive, reliable cars and small trucks that generate modest profits -- exactly what Tesla, maker of whiz-bang luxury EVs with chronic quality issues, won't be doing. (Yes, chronic quality issues. Consumer Reports just ranked Tesla second-to-last in reliability, 27th out of 28 brands. I know Tesla fans say they don't mind, but if Tesla sells only to Tesla fans, it's unlikely to break 2 million cars a year, much less 13 million.) 

"Fine," I hear you saying, "but Tesla is so much more than an automaker." Is it really, though? Yes, they'll have some high-margin software subscription services, but so will General Motors and Ford and Nio and many others. Solar panels? Batteries? Those aren't real businesses yet, and even if they become real businesses they won't make that 15% operating margin any fatter.

As for "full self-driving," outside of Tesla-fan circles, experts agree that Tesla is behind the big automakers on autonomy, not leading. 

To sum up: Tesla's stock price has been driven up over the last couple of years by a lot of wishful thinking. Sooner or later, reality will assert itself, as it always has in the past. When it does, Tesla will almost certainly return to a valuation much closer to $50 billion than $1 trillion.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.