Why Tesla stock fell on Tuesday

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Shares of Tesla (NASDAQ: TSLA) fell sharply on Tuesday, declining nearly 4% as of 11:40 a.m. EDT. The growth stock’s decline follows the electric-car maker’s second-quarter report, which was released after the bell on Monday.

Tesla shares are likely trading lower primarily because of a bearish day in the overall market. But an analyst’s note to investors about the stock’s frothy valuation may also be weighing on the stock.

So what

When Tesla reported its second-quarter results on Monday afternoon, shares initially rose several percentage points in after-hours trading. Optimism for the stock wasn’t surprising, as the company’s revenue and earnings easily beat analysts’ consensus forecasts for the two metrics.

Revenue nearly doubled year over year, reaching about $12 billion. This beat analysts’ consensus forecast for $11.3 billion. Non-GAAP (adjusted) earnings per share came in at $1.45, beating analysts’ average projection of $0.98.

But the market’s sharp pullback on Tuesday is likely weighing on shares. The S&P 500 is down nearly 1% at the time of this writing, and the Nasdaq Composite is down almost 2%.

Another reason for the stock’s decline on Tuesday could be an analyst’s decision to reiterate an underperform rating for the stock following Tesla’s earnings release. While Needham analyst Rajvindra Gill acknowledged improvements in the company’s cost structure, he also said that shares appear to be priced for perfection.

Now what

Despite the stock’s negative price action today, investors should be encouraged by Tesla’s record second quarter. Not only was the automaker’s financial performance impressive but management said global orders for its vehicles are at an all-time high. In addition, Tesla reiterated guidance for total deliveries in 2021 to grow more than 50% year over year.

Of course,  it’s true that valuation is something investors should consider carefully. They should be mindful that Tesla’s high valuation has priced in staggering growth for years to come.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why Tesla stock fell on Tuesday appeared first on The Motley Fool Australia.

More reading

• Tesla (NASDAQ:TSLA) share price climbs on record revenue and profits
• Why Tesla stock bounced ahead of earnings
• Zip share price falls, Pilbara Minerals flies. And the BHP share price gets a Tesla bounce. Scott Phillips on Nine’s Late News
• Bitcoin gains after Musk, Wood, and Dorsey spruik the crypto
• The 2 best shares to hang your hat on: fund managers

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

from The Motley Fool Australia https://ift.tt/3f2ZzT8