what happened
Sections of Tesla (NASDAQ: TSLA) he hit Friday. At its worst during the trading day, the stock was down 6.3%. However, before the market closed, shares were down 4.4%.
The decline in the growth stock extends a recent major pullback to the stock, largely driven by a growing market sentiment about the valuation of stocks like Tesla that rose to the top in 2020. Investors seem to be making some profit.
Image source: Tesla.
so what
Much of the growth stock has been falling since around mid-February. The market seems to have decided that it was time to make some profit on these stocks after a big run in 2020 and the first six weeks of this year. While a lot of growth stock went back a few percentage points on Friday, not all of them did. Further, most growth stocks are still down sharply from February levels.
In the absence of any major developments for Tesla in particular on Friday, there are fears in the midst of a pullback to the stock that it may be the main driver for the recession.
In fact, shares are still up 640% from the beginning of 2020.
Now what
Tesla shares trade at a price valuation, forcing them to look as if they could be highly valued. Investors should consider that regulation expects vehicle delivery to grow more than 50% this year. In fact, Tesla has stated that it intends to maintain an average growth rate of around 50% for future vehicle deliveries.
In addition, Tesla is now generating a huge amount of free cash flow. This means that not only is there huge growth opportunities in front of it, but it can also fund those opportunities with inward cash flows.
Tesla stock may be down, but its business is thriving.
This article represents the opinion of the writer, who may not agree with the “official” recommendation position of the Motley Fool chief consulting service. We are motley! Questioning an investment dissertation – even one of our own – helps us to think critically about investing and make decisions that will help us become softer, happier and richer.