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Why Tesla Stock Rose Sharply on Wednesday

By Daniel Sparks – Sep 9, 2020 at 9:59AM

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After the stock's historic one-day decline on Tuesday, shares of the electric-car maker are rebounding.

What happened

Shares of electric-car company Tesla (TSLA 1.72%) jumped on Wednesday, rising as much as 10.5%. As of 10:15 a.m. EDT, however, the stock was up about 6%.

The stock's gain followed its sharpest-ever one-day drop on Tuesday. The stock's rise today, therefore, suggests some investors think shares were oversold.

A chart showing a stock price moving higher.

Image source: Getty Images.

So what

Wednesday's rebound for Tesla stock not only follows a 21% one-day sell-off for the stock, but also a sharp pullback for the growth stock last week as well. In total, the stock fell more than 30% between Sept. 1 and Sept. 8.

Wednesday's move higher implies that some investors believed the month-to-date sell-off for Tesla stock in September had created a buying opportunity.

The stock is also likely rising sharply higher on Tuesday because of the overall bullishness for growth stocks like Tesla today. Many growth stocks had been similarly selling off in early September, but investors seem to be pouncing on the opportunity to buy them at lower prices. This broader-market appetite for growth and tech stocks on Wednesday is likely helping Tesla stock.

Now what

Investors should expect sustained volatility in Tesla's stock price. Not only are growth stocks inherently more volatile, but the electric-car company's stock is still up an extraordinary 677% over the past 12 months. With a gain like this behind it, a bumpy road ahead is almost guaranteed.

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.

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