What happened
Shares of electric-car maker Tesla (TSLA 3.33%) are down again on Thursday as investors continue to doubt the stock's pricey valuation. Shares fell as much as 5.6% on Thursday, but are down about 3.2% at the time of this writing.
So what
Tesla's decline on Thursday follows several reports that may be driving bearish sentiment toward the stock. Earlier this week, Goldman Sachs lowered its price target for the stock from $190 to $180, representing significant downside; the Insurance Institute for Highway Safety (IIHS) retested the Model S for an offset frontal collision (the type in which 25% or less of a car's front hits another car or a stationary object) and awarded the vehicle only an "acceptable rating," or the auto safety organization's second-best safety designation; and Volvo announced on Wednesday that every vehicle it builds from 2019 onward will include an electric motor.
Image source: author.
Volvo's move marks a "historic end" to vehicles built with only an internal combustion engine, and places electrification "at the core of its future business," Volvo said in a statement. Some investors may worry that automakers' increasing focus on electric vehicles could lead to a more competitive environment for Tesla.
Now what
Tesla stock's pricey valuation, particularly evident by the company's wild market capitalization of about $52 billion, means that any negative news can send shares tumbling lower. With a market capitalization close to General Motors' and higher than Ford's, Tesla is clearly priced for high levels of growth for years to come. Any news that makes this outcome appear less certain, therefore, is bound to weigh on the stock.
