What happened

Shares of Tesla (NASDAQ:TSLA) fell Tuesday, adding to Monday's decline. The stock slipped as much as 5.6%, and was down 4.2% as of 12:50 p.m. EST on Tuesday.

While some of the stock's pullback likely has to do with a decline in the broader market amid growing coronavirus fears, it may also reflect an analyst's move to downgrade the stock from a buy rating to a hold rating.

A red Model 3 driving at sunset

The Tesla Model 3. Image source: Tesla.

So what

Jefferies analyst Philippe Houchois called attention to Tesla stock's valuation on Tuesday, noting that shares don't seem particularly attractive at this level.

But Houchois is optimistic about Tesla's business opportunity. He called the electric vehicle (EV) market opportunity a "positive-sum game" in which Tesla is well positioned. And although Houchois lowered his rating for the stock, he did notably boost his 12-month price target from $600 to $800. This increased target likely reflects the stock's huge run-up in recent months; even including the stock's sharp decline during the last several days, shares are up 278% over the last six months.

Now what

Tesla investors should expect volatility in the stock to continue. Given the stock's premium valuation and its huge run-up, big swings in the EV maker's stock will likely be commonplace.