Investors were surprised by the big rally in the stock market on Thursday, but Friday brought another dose of reality and disappointment. After having posted monumental gains despite high readings on inflation, the Nasdaq Composite (^IXIC 0.08%) closed at its worst level of the year, and the S&P 500 (^GSPC -0.02%) and Dow Jones Industrial Average (^DJI 0.35%) gave up most of their advances from earlier in the week.


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Data source: Yahoo! Finance.

One of the biggest stock stories of the past several years has been Tesla (TSLA -3.74%). The electric vehicle (EV) pioneer has given investors huge gains since 2019, and even briefly became a trillion-dollar company as it built out its production capacity in an effort to meet the strong customer demand for its EVs.

For much of 2022, Tesla stock managed to avoid the worst impacts of the Nasdaq bear market, holding up reasonably well even as other large-cap players in the index fell more sharply. However, Tesla shares have finally shown their vulnerability: They've lost about a third of their value in less than a month. Tesla closed Friday's session at less than half its closing high back on Nov. 4, 2021, leading some investors to wonder whether now might finally be the time to take a closer look at the EV stock.

A lot is happening with Tesla

Several items hit Tesla newsfeeds on Friday. One involved the company's new Gigafactory facility in Germany --  a news report suggested that due to problems with a production process, the company might not be able to begin to mass-produce electric battery cells there until 2024. Tesla has high hopes for the facility, and as it ramps up, its output could eventually reach 500,000 vehicles annually. But for the site to reach peak efficiency, it will be useful if it has the capacity to produce all of its key components instead of relying on other Gigafactories around the world -- especially as Tesla aims to simplify a supply chain and distribution system that's already showing signs of strain.

Some investors also anticipate that proposed changes to the accounting rules for cryptocurrency holdings could have an adverse impact on Tesla. The U.S. Financial Accounting Standards Board recently discussed requiring businesses that hold digital assets to account for them at fair value on their balance sheets. Although Tesla sold off a substantial portion of its crypto holdings earlier this year, it's possible that the new accounting requirements (if adopted) would create more volatility in the automaker's quarterly earnings, distracting from the core results of its EV business. Admittedly, Tesla's crypto holdings aren't extensive enough to make any significant difference to its balance sheet at this point, but CEO Elon Musk has enough of a reputation for talking about digital assets that some investors see his fortunes as being tied to those of cryptocurrencies from time to time.

What to expect from Tesla next week

Investors will get the latest financial results from Tesla next week, and one question they'll be asking is what impact, if any, the disparity between its third-quarter delivery and production totals will have on its income statement. Tesla has cited logistical issues to explain why its production numbers met targets, but its delivery figures fell short. If those issues prove costly enough to substantially affect the company's profits -- even temporarily -- it could explain the stock's recent declines.

It's new for some shareholders to see Tesla prove vulnerable to market downturns. In the end, though, what matters is whether Tesla's business can live up to the high expectations investors have for it. There are bound to be some speed bumps along the way, but those who believe in Tesla's long-term vision will likely be pleased to have a chance to buy shares at prices 50% cheaper than they were less than a year ago.