Shares of Tesla Motors (NASDAQ:TSLA) have sold off sharply over the past two days, due both to a downgrade from buy to hold from an analyst at R. W. Baird, and to the release of an Internet video that shows a Tesla Model S in flames following an accident.
In this video, Motley Fool analyst Tim Hanson sits down with host Chris Hill, to discuss whether the sell-off is a buying opportunity. Tim tells investors how he sees the stock price as having become disconnected from the fundamentals of the business, and overly optimistic even for a company of this potential. He still sees Tesla as being far too expensive, even after the sell-off.
Tim also discusses the idea of headline risk, and how stocks surrounded by so much market optimism can become priced to perfection. He notes that with stocks such as Tesla, tiny events in the news can cause large fluctuations and heavy volatility in the share price, something he prefers to avoid. Tim closes by noting that for current shareholders who have enjoyed a great run with the stock thus far, there may be a couple reasons on the horizon to lighten your Tesla holdings.
Chris Hill has no position in any stocks mentioned. Tim Hanson has no position in any stocks mentioned. The Motley Fool recommends Tesla Motors. The Motley Fool owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.