Why Tesla Stock Is Down By 7% Today

Tesla Stock Falls Despite Beating Analyst Estimates

Shares of Tesla gained strong downside momentum after the company released its fourth-quarter report.

Tesla reported revenue of $17.72 billion and adjusted earnings of $2.54 per share, beating analyst estimates on both earnings and revenue.

While quarterly results were strong, the market focused on Tesla’s plans for 2022. The company stated: “Our own factories have been running below capacity for several quarters as supply chain became the main limiting factor, which is likely to continue through 2022”.

It looks that the market is worried about Tesla’s ability to reach growth targets amid continued problems in the supply chain. For high-valued stocks like Tesla, failure to show expected growth could have a significant negative impact on the share price.

What’s Next For Tesla Stock?

Tesla stock is down by 30% from the highs that were reached back in November, but the company’s shares remain richly valued. Analysts expect that Tesla will report earnings of $9.33 per share in 2022, so the stock is trading at 93 forward P/E.

At such valuation levels, Tesla is expected to show robust growth. The pace of this growth is now under question as Tesla stated that it expected supply chain problems throughout 2022.

In addition, the recent hawkish comments from Fed Chair Jerome Powell may put additional pressure on high-PE stocks, as markets will likely price in aggressive rate hikes, which are bearish for high-growth plays.

In this light, it remains to be seen whether speculative traders will rush to buy Tesla stock after the recent pullback.

Given the current valuation levels, Tesla stock has plenty of room to move lower in case the market starts to question its growth story for this year. At the same time, any significant rebound in S&P 500 could provide material support as traders and investors remain focused on mega-cap stocks.

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