Tesla (NASDAQ:TSLA) posted third-quarter deliveries that easily beat consensus estimates but the stock fell 7.38% on Oct. 3. Why did markets did not bid shares higher?

Profit-taking on the news is one reason for the stock’s slump. The company posted deliveries of 139,300 in Q3. Over 124,000 are Model 3 and Model Y. Picky speculators may have lost patience with Tesla’s financial performance. The company only reported modest revenue growth of around 20% in two years. It does not make a profit when excluding ZEV (zero-emission vehicle) credits. Still, so long as governments offer credits, the stock should not fall by much.

Despite the global pandemic, the over 40% growth in deliveries is a phenomenal achievement. TSLA stock rose almost four-fold in that time. Had the stock held the $500 level, shareholders would have enjoyed a five-bagger in returns.

Risks

Tesla’s valuations will keep value investors away. The stock has a debt-to-equity of 1.4 times and a price-to-sales in the teens, higher than that of Amazon.com (NASDAQ:AMZN). If bullish sentiment reverses, the stock could fall until bears cover their ~8% short-float position against the stock.

Tesla is still a good trade but its direction is less clear. Take only small bets on this stock until market volatility falls.