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Why Tesla Shares Are Down By 10% Today?

Tesla Video 05.03.21.

Tesla Moves Lower Amid Broad Sell-Off In EV Stocks

We have recently discussed why shares of Tesla are in a bear market but the situation is developing fast, and Tesla stock moved to new lows.

Today, Tesla shares are down by about 10% while S&P 500 is losing some ground in volatile trading. The main reason for the current downside move is the sell-off in the electric vehicle space. Investors are rushing out of their speculative EV investments as they look worried about valuation of high-flying tech stocks.

In my opinion, the recent rise of U.S. Treasury yields has pushed investors to evaluate their portfolios and focus on the current valuation of the companies.

Valuations have been rich for many months. However, the market has recently started to pay attention to them so valuations may ultimately begin to have a notable impact on the trading dynamics of EV stocks.

What’s Next For Tesla?

In Tesla’s case, the stock continues to trade at very high levels on almost every multiple so the company’s market capitalization depends on the market mood.

The stock has already declined by more than 35% from the highs that were reached back in January, so it may soon attract bargain hunters who will be willing to bet on the leading EV company after the major pullback.

At the same time, Tesla cannot count on any support from valuation-oriented investors as it remains very expensive. Thus, the stock will likely need a change of market mood towards riskier stocks in order to find support and get back to the upside mode.

It should be noted that legacy automakers like Ford or General Motors are trading close to their recent highs so the current sell-off in EV stocks highlights investors’ concern about their valuation rather than any doubts about the future of the auto industry.

For a look at all of today’s economic events, check out our economic calendar.