Since the end of 2019, Tesla shares have been setting new records day after day. In total, from the beginning of December to the beginning of February, they showed growth by 2.5 times (up to $887 per share), and the company's capitalization was estimated at a record $140.5 billion for Tesla. However, on February 5, there was a significant drop in stocks by 17%.

Three Reasons Why Tesla Stocks Were at Their All-Time High:

The first reason for the rapid growth of Tesla shares is two successive quarters of the company with good financial results and record sales of electric cars. Also, the opening of a factory in Shanghai played a significant role. Investors believed in Tesla even more and began to buy shares.

The second reason is the news that the major investment funds are changing their policies and are looking for a replacement for oil and gas assets amid the trends for environmental protection. In this regard, Tesla looks like a pretty attractive asset.

The third reason is the activity of investors. In the conditions of the rapid growth of stocks, they had to buy them in bulk. This process also increased the influx of inexperienced investors who began to invest in Tesla because of hype.

Three Reasons Why Tesla Stocks Are Falling Now:

Firstly, because of the coronavirus. Production at the new factory in Shanghai is now suspended. Therefore, sales growth in the current period is postponed.

Secondly, investors are now forced to close their positions, buying up shares and distributing debts, and no longer feel the need for Musk's securities.

Thirdly, many investors who bought shares earlier began to sell them at a reasonable price. These included inexperienced investors who invested only because of hype. Supply increased, demand fell, so the share price fell as well.

In fact, nothing unusual is happening with Tesla shares – after a rapid increase, as a rule, a price correction follows, and this process just started on February 5. In many ways, their fall is now affected by the same thing that influenced their growth.

What's Next?

Even after a 17% drop in shares, Tesla is still worth more than double than in early December 2019. At the same time, experts believe that the likelihood of a further fall in shares is higher than the resumption of their growth.