Please ensure Javascript is enabled for purposes of website accessibility

Why Tesla Stock Fell Sharply (Again) on Wednesday

By Daniel Sparks - Mar 3, 2021 at 6:36PM

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

Is Tesla losing market share to a new competitor?

What happened

Shares of Tesla (TSLA 4.88%) were hit hard on Wednesday. The stock fell 4.8% by the time the market closed.

The stock is likely down primarily because of a decline in the overall market that weighed particularly heavily on growth stocks like Tesla. However, shares may also be down because of a note from Morgan Stanley analyst Adam Jonas about Ford's new electric Mustang Mach-E taking market share from Tesla in February.

A chart showing a stock price falling

Image source: Getty Images.

So what

Jonas estimates that Tesla's market share of the EV market in the U.S. dropped from 81% in February of 2020 to 69% in February of 2021, largely due to market share gains from the new Mustang Mach-E.

Still, this doesn't mean Tesla's electric vehicle sales are faring poorly; the overall EV market grew 40% year over year during the period, Jonas estimates. 

The main reason for the stock's decline, however, is likely a pullback in the overall market on Wednesday. The S&P 500 and Nasdaq Composite fell 1.3% and 2.7%, respectively. Many growth stocks like Tesla fell even more.

Now what

Tesla stock's decline adds to an overall downward trend for the stock in recent weeks. After shares rose to an all-time high of $900.40 earlier this year, the stock is now down 7% year to date, underperforming the S&P 500's 2% decline.

Investors should expect more volatility from Tesla shares, as growth stocks are typically much more volatile than the overall market.

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.
$658.80 (4.88%) $30.64
Ford Motor Company Stock Quote
Ford Motor Company
$12.71 (2.33%) $0.29
Morgan Stanley Stock Quote
Morgan Stanley
$82.23 (0.33%) $0.27

*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 service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/26/2022.

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.