Please ensure Javascript is enabled for purposes of website accessibility

Why Tesla Stock Fell Sharply (Again) Today

By Daniel Sparks - Feb 23, 2021 at 9:13AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The electric automaker's shares appear to be getting caught up in broader market skittishness.

What happened

Shares of Tesla (TSLA 4.53%) are getting slammed on Tuesday morning. They fell by more than 7% at market open. Further declines had the shares down by almost 13% at one point, but as of 10:05 a.m. EST, they were back to being down by about 8%.

The pullback in the electric automaker's shares is likely primarily due to more bearishness in the overall market. Growth stocks like Tesla are getting hit particularly hard.

A chart showing a stock price falling

Image source: Getty Images.

So what

Highlighting the market's decline on Tuesday, the S&P 500 is down about 1.1% as of this writing. But the tech-heavy Nasdaq Composite is down 2.3%.

The market's skittishness comes as traders anticipate public comments from Federal Reserve Chairman Jerome Powell. The Fed Chair has scheduled hearings Tuesday and Wednesday. Investors will be paying close attention to what he says about rising government bond yields and the potential for inflation.

Tesla stock's outsize decline relative to the market's pullback isn't surprising, as it's coming off a huge run-up. Even after Tuesday's slide, shares are up by about 270% over the past 12 months.

Now what

While Tesla's stock is taking a beating, 2021 will likely be a pivotal year for its business. Management believes deliveries will grow at a year-over-year rate of greater than 50% this year. Further, Tesla said it thinks it can average a 50% annualized growth rate in deliveries over a multiyear period.

In addition, management believes the automaker's profitability will improve over the long haul. "We expect our operating margin will continue to grow over time," Tesla said in its fourth-quarter update, "continuing to reach industry-leading levels with capacity expansion and localization plans under way." 

Unfortunately, however, much of Tesla's exciting growth story may already be priced into the stock, so it's not surprising to see volatility in the share price.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Tesla, Inc. Stock Quote
Tesla, Inc.
TSLA
$737.12 (4.53%) $31.91

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.