Why Tesla stock jumped again on Thursday

Following a sharp decline in early September, the stock’s rebound has extended to another trading day. But shares are still down sharply for the month.

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Image source: The Motley Fool.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

On Thursday, shares of electric-car maker Tesla Inc (NASDAQ: TSLA) continued to rebound from their worst one-day sell-off on record earlier this week. The stock jumped as much as 8.9%, but as of 11:15 a.m. EDT yesterday, it had settled to about a 6% gain. Tesla stock closed the day 1.38% higher.

The move higher on Thursday extends Wednesday's rally for the growth stock. Based on this two-day rebound, investors seem to believe that Tesla shares were oversold during a big sell-off on Tuesday, creating a buying opportunity.

So what

Until Wednesday, Tesla was seeing significant selling pressure this month. The stock appeared to be taking a breather after a wild run higher. It had gained about 500% between the end of 2019 and 31 August – a move that seemed to persuade some shareholders that it was time to do some profit-taking.

But after the September sell-off worsened on Tuesday, when the stock slid about 21% in a single day, some investors appear to be aggressively buying shares.

Now what

While Tesla is still down 19% in September, investors should keep in mind that the growth stock certainly isn't cheap. The company trades at about 17 times sales, up from a multiple of about eight as recently as a few months ago and a multiple of three just last year. With the stock's valuation changing so quickly, continued volatility is almost inevitable. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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