Has Tesla finally bottomed? Maybe?November 19, 2013: 1:19 PM ET
The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.
Good news for Tesla investors! You don't need as many bitcoins to buy the electric carmaker's stock as you did just a few months ago.
Okay. I'm being sarcastic ... which is par for the course with me. Shares of Tesla (TSLA) are down 35% from the all-time high they hit on the last day of September. And the price of Bitcoin has gone parabolic ... which is technical trader jargon for it's up a freaking lot in a ridiculously short period of time.
Fun facts! The price of one bitcoin on September 30 was just under $142. Tesla closed that day at $193.37. Tesla's stock now trades around $127 while a bitcoin cost around $700 in midday trading Tuesday. (And that's down from a high above $900 just a few hours earlier!)
Still, it wasn't that long ago that Tesla's stock resembled Bitcoin. Nothing could bring the company's shares down ... not even numerous remarks by CEO Elon Musk about how he thought the stock was trading at a price that was more than the company deserved.
That's starting to change though, now that investors are worried about the spate of fires in Model S cars and a subsequent probe by the National Highway Traffic Safety Administration.
Even though Tesla has received extraordinarily high marks for safety and Musk has been on a crusade to remind people that there are far more accidents in gas guzzlers where people actually get hurt, the stock has tumbled.
But anyone who bought Tesla at the beginning of the year has little to complain about: shares are still up more than 275% year-to-date. That's rarefied air. You might even need to get into one of Musk's SpaceX rockets to reach it.
So have investors really been dumping Tesla in the past few weeks because they fear the Model S is a flammable death trap? I don't think so. The lesson here is that anytime a stock goes up as sharply as Tesla's has, the party can't last forever.
The only thing that's harder than picking when a momentum stock has hit a top is trying to identify the precise moment when said momentum stock has bottomed after it had its Icarus moment and starts plunging back to Earth.
Sure, Tesla enjoyed a nice bounce on Tuesday. But shares have fallen more than 30% since November 5, the day Tesla reported its latest earnings. Those results raised more questions about whether Tesla's growth is sustainable.
Tesla bears -- of which there are a legion, considering that short sellers own more than a third of the available shares -- think that earnings look a lot better than they really are because Tesla generates a portion of its revenue from selling zero-emission vehicle credits to other carmakers.
Even when you factor in Tesla's recent pullback, the stock trades at 83 times 2014 earnings estimates and 5 times 2014 sales forecasts. GM and Ford trade at price-to-earnings ratios of about 9. And their market value is well below their estimated revenue for 2014.
Once investors decide that a stock has overheated and that all news is considered bad, it can take an awfully long time to get back on Wall Street's good side.
We might be seeing the beginning stages of that with Best Buy (BBY). The electronics retailer has been an amazing turnaround story this year, with shares up 236%.
But the stock plunged more than 8% Tuesday after the company warned that heavy promotions during the holiday shopping season could hurt its profit margins. Oops. When a momentum stock doesn't deliver perfection it's time to shout 'look out below!'
Tesla and Best Buy are merely the latest Wall Street darlings to fall from grace. Just look at Apple (AAPL).
The iEverything maker's stock fell as much as 45% from its September 2012 all-time high of $705. While Apple's shares have rebounded sharply from this year's lows, they are still trading 26% below their record.
Facebook (FB) is another example. Yes, the social network's stock has recovered from last year's post-IPO meltdown. But the stock plunged 61% from the $45 high point it hit on its first day of trading in May 2012 to a low of $17.55 last September before it started its climb back.
And then there's Netlfix (NFLX). The online streaming video king has proven that Orange is the New Green. The stock is up 272% this year. But it has had a history of whiplash-inducing volatility.
Remember the price hike and Qwikster DVD debacle in 2011? Netflix plummeted 80% between July and November of that year. That's just four months. It wound up doubling by March 2012. Three months! It then plunged another 60% by August of last year before finally bottoming and climbing to new all-time highs.
Interestingly, Netflix CEO Reed Hastings has recently expressed reservations about his company's stock price. He, like Musk, is a little worried that there is too much euphoria.
So what's next for Tesla's stock? It really is impossible to say. But just because it has already fallen sharply doesn't mean that the selling is over.
Yes, Tesla could quickly prove the skeptics wrong and bounce back like Facebook. Or it may need more time to convince investors to jump back on the momentum train (or is it momentum Model S?) like Apple.
Either way, the only thing that seems certain is that Tesla will remain insanely volatile ... although probably not as nausea-inducing as Bitcoin. Which is not saying much.