Markets

Why Tesla Stock Fell Sharply on Friday

What happened

Shares of electric-car maker Tesla (NASDAQ: TSLA) fell sharply on Friday, declining 9% as of 9:50 a.m. EDT.

The stock's decline comes after a huge run-up in the stock price over the past month. Some investors may be taking profits after the stock's big move higher.

Tesla vehicles

Image source: Tesla.

So what

Though Tesla beat earnings estimates earlier this week when it reported second-quarter results, it's not surprising to see pressure on the growth stock's price on Friday. After all, shares rose from around $1,000 one month ago to above $1,600 this week. Even more, the stock is up more than 400% over the last 12 months -- and that includes today's pullback. In other words, the stock is due for a breather.

Also driving the decline in Tesla's share price on Friday may be an analyst's decision to downgrade his rating for Tesla stock from "outperform" to "neutral." The analyst, from Daiwa Capital Markets, says that many of the positive catalysts on the horizon for the company are already priced into the stock.

Since the stock dropped sharply today, the analyst's 12-month price target for the stock of $1,650 now notably represents 20% upside from where shares are trading at the time of this writing.

Now what

Analysts will be watching to see how many vehicles Tesla can deliver in 2020. The company reinitiated guidance for half a million vehicles this year after putting that outlook on hold in late April, when the electric-car company's factory in California was temporarily shut down.

In addition, investors will be eyeing Tesla's upcoming event on Sept. 22, where management will share some updates on its battery developments.

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Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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