Why Tesla stock fell sharply on Friday
Actions of You’re here (NASDAQ: TSLA) were hit hard on Friday. The electric car manufacturerThe stock fell 7.2%. But at 12:50 p.m. ET, the stock was down 5.5%.
The stock was likely down due to pressure on growth stocks this week. Many growth stocks like Tesla fell several percentage points or more on Friday, continuing a recent market trend of selling many growth stocks.
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One of the main factors that sparked a sell-off in growth stocks on Friday was an epic 40% drop in shares in the electronic signature specialist. DocuSign (NASDAQ: DOCU). Shares in DocuSign were slammed after the company provided a weaker-than-expected outlook for its fourth quarter earnings.
âAfter six quarters of accelerated growth, we have seen customers return to more normalized buying habits,â the company said in its third quarter update.
The huge drop in the stock price may have worried some growth-stock investors about the expensive valuations of those stocks, causing instinctive selling on Friday.
Tesla shares have easily beaten the market this year, rising 44%, even including today’s pullback. It’s not surprising to see stocks take a break as investors reassess the valuation of growth stocks.
While it makes sense for some growth stocks to drop to more reasonable valuations, investors should keep in mind that many growth stocks trade at premiums for good reasons. Tesla, for example, saw its vehicle sales increase 87% year-over-year on a 12-month basis. In addition, management expects deliveries to average an annualized rate of 50% over a âmulti-year horizonâ going forward – and demand for the company’s vehicles combined with the company’s development efforts. Tesla’s production (including two new factories about to go online) suggest this uptrend view is possible.
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Daniel sparks has no position in any of the stocks mentioned. Its clients may own shares of the companies mentioned. The Motley Fool owns shares and recommends DocuSign and Tesla. The Motley Fool has a disclosure policy.
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