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Tesla Races Downward on Guidance

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Tesla Races Downward on Guidance

Shares of Tesla (NASDAQ:TSLA) have been center stage this year as exuberance for the company reached meteoric levels. Year to date, shares of the electric sports car maker have risen by a whopping 375% while the broader averages have struggled to keep their 20 percent gains. A strong cult following for both the brand, and the stock, has developed over the last year. Being the clear cut leader in the electric vehicle space, Tesla has gained interest from many types of investors. However, on Tuesday shares of the company were sent racing to the downside in the after hours session following the company’s fourth quarter report after the market close.

Tesla announced it sold more than 5,500 Model S electric cars during the third quarter, short of some Wall Street estimates. The company reported a third-quarter adjusted profit of 12 cents per share. These results beat Wall Street analysts expectations of 11 cents per share, according to Thomson Reuters. While the company may have beat on the bottom line, future guidance was the key to the quarter. Tesla stated it expected its fourth-quarter profits to be “about consistent” with the third quarter according to legendary entrepreneur Elon Musk. Analysts had expected Tesla to report a fourth-quarter profit of 20 cents per share.

Going into the remainder of the week many traders are expecting increased volatility. Look for the company’s already heavily priced options to become even more expensive due to the likelihood of large price swings. It will be interesting to see if the company’s strong handed retail investor base will choose to cash in some of their gains on sharp weakness. Any investor with returns of nearly 400 percent would be tempted even in the most bullish scenario. At the time of this writing, shares of the company were to the downside by over 10 percent to $157.40 per share.

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