Tesla Stock Set To Extend Slide For 4th Day? What's Dragging It

Shares of Tesla, Inc. TSLA fell sharply in premarket trading on Wednesday, underperforming the broader market, which is priming for a flattish to slightly higher open.

The stock has closed lower in each of the past three sessions.

After aggressively cutting prices for its Model S and X vehicles in China earlier this week, Tesla announced Wednesday as much 6.9% reduction in prices for inventory Model S and X vehicles in China.

Price cuts typically trigger a bearish sentiment as investors see it as a signal of a slowdown in demand. Commenting on the latest China price cuts, Future Fund's Gary Black said he sees only an impact of about only 1.5 cents per share. He, however, said the price cuts on high-end models reflect short-term thinking by Tesla China.

He said he would prefer TSLA management to “invest a portion of the now $200M total spent on China price cuts ($60M on S/X, $140M on Monday's M-Y LR and Perf cuts) on advertising to build long-term brand equity for TSLA China's M-S, M-X, and M-Y LR/Perf franchises."

This, according to the analyst, will produce a halo effect for Tesla China's Model Y Standard Range and Model 3 franchises as well.

Some of the weaknesses may also have to do with the general risk-off mood, which first hits growth stocks such as Tesla.

In premarket trading, Tesla fell 2.42% to $227.33, according to Benzinga Pro data. If the pre-market losses hold in the regular session, the stock is on track to drop to its lowest level since June 8.

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