Why Tesla Stock Fell 13.9% in September

(The Motley Fool) – What happened
Shares of Tesla (NASDAQ:TSLA) slumped 13.9% in September, according to data from S&P Global Market Intelligence. The electric vehicle (EV) company is one of the most hotly contested stocks on the market, but so far bulls have been clear winners — with the stock climbing roughly 396% year to date and nearly 500% over the last three years.

Tesla stock experienced volatility early in the month due to waning excitement following its stock split at the end of August and the company being passed over for inclusion in the S&P 500 index. Shares saw additional pressure from analyst coverage and a mixed reception for the Battery Day conference it held on Sep. 22.

So what
Whether you’re bull or bear or just keeping track of a high-flying industry leader, Tesla’s double-digit slide last month should be viewed in context. The company’s share price skyrocketed 74% across August’s trading thanks to momentum for the business and excitement about its 5-for-1 stock. September’s pullback looks relatively small in light of those gains, even though there were significant events driving the sell-off.

On the heels of stock-split excitement dissipating, Tesla shares experienced a sell-off early in September after the company was passed over for inclusion in the S&P 500 index. The stock sank 15% on Sep. 8’s trading after news hit that the company failed to gain a spot on the index.

Inclusion in a major index is often a positive catalyst for stocks because investors buying index funds are buying stock in the included companies. There hasn’t been an official explanation for why the S&P Dow Jones Indices team opted not to add Tesla to the S&P 500 index, instead choosing to add Teradyne, Catalent, and Etsy. However, it’s possible that doubts about the EV leader’s ability to post continued profits (consistent profitability is typically a standard for index inclusion) played a role. Tesla posted its first full-year profit when it reported fourth quarter results in January.

Tesla shares rebounded in the week of trading following the indexing-related sell-off and then plateaued mid-month, then proceeded to tumble again after the company’s Battery Day presentation underwhelmed investors and analysts. The event had been hyped as a potential showcase for revolutionary battery technology, but the tech may not have been as groundbreaking as some expected.

Tesla did unveil its biscuit tin battery cell, which the company says will pave the way for a 16% increase in its vehicles’ range capacity and also be less expensive to produce. Elon Musk and Co. also used the event to debut its high-powered Model S Plaid car and highlight new autopilot technologies, that Cybertruck had received over half a million preorders, and plans for an electric vehicle in the $25,000 price range. The conference featured plenty of notable news, but it was followed by coverage from multiple analysts branding the showcase a disappointment.

Now what
Tesla stock has lost additional ground early in October’s trading, after the company delivered third quarter results that appear to have underwhelmed Wall Street on some fronts. Volatility for the broader market and growth-dependent stocks in particular may have also been a factor in the dip. The EV company’s stock is down roughly 3.2% in the month so far.

Tesla shares climbed on Oct. 1, but sank on Oct. 2 after the company announced vehicle deliveries that fell short of the market’s expectations. The company delivered 139,300 vehicles in the third quarter, a new quarterly record, but some investors seem to have been looking for even greater performance.

Tesla is now valued at $387.5 billion and trades at roughly 224 times this year’s expected earnings and 13 times expected sales.

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