Shares of Tesla (NASDAQ:TSLA) fell sharply on Thursday morning, declining about 5% shortly after the market opened.
The stock's slide is likely due to an analyst's move to reiterate a sell rating on shares.
Citigroup analyst Itay Michaeli boosted his 12-month price target for the growth stock by more than 80% on Thursday. This is in response to Tesla's recently reported strong second-quarter deliveries, as well as operating expenses in 2020 that may be lower than his initial estimates for the year.
But here's the catch: The new price target sits about 70% below where shares are trading now. Michaeli gave the stock a price target of $450, up from $246 previously. But shares are sitting not far from $1,500.
There's a "lack of evidence" to substantiate the stock's nearly 500% run-up over the past 12 months, the analyst says. In particular, he questions whether demand will continue to rise rapidly in this environment, and if emerging competition may be more of a threat than investors anticipate.
Investors will likely get a timely window next week into how demand for Tesla's vehicles is faring. The automaker reports second-quarter results after market close on Wednesday, July 22.
In its quarterly updates, Tesla typically provides commentary on the trajectory of its vehicle order volume and its full-year outlook for deliveries. Both of these tidbits will help give investors a better idea of how much demand the automaker is seeing.