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Is Tesla's downshift for real?

April 15, 2014: 3:49 PM ET

The break lights are finally coming on for investors' favorite auto stock.

Shares of Tesla Motors (TSLA) fell over 2% Tuesday after reports surfaced that Arizona failed to pass a bill to allow the company to sell cars directly to consumers.

It marks the fourth straight day of losses for Tesla's stock.

It's unclear what effect the Arizona bill actually had today. The automaker has long sought to bypass dealerships because it says they wouldn't do a good enough job of explaining the advantages of electric cars.

Related: Tesla to raise $1.6 billion for 'Gigafactory'

Instead, there appears to be a broader market souring on Tesla. The stock has tanked roughly 17% in the past month.

That's notable for a company that Wall Street and individual investors alike have been head over heels for. After all, Tesla won CNNMoney's fourth annual March Stock Mania.

While the stock began to falter early along with the rest of the Nasdaq, investors began worrying that the costs of building Tesla into the next great auto company could eat into sales more than previously forecast, said Brian Sozzi of Belus Capital Advisors.

"The market is questioning the fundamental outlook for the first time in a while," he said.

The decline comes amid a broader sell-off in so-called momentum stocks, which until recently seemingly could do no harm.

Netflix (NFLX) is down 23% in the last month, while Twitter (TWTR) has fallen 14%.

Telsa is still up almost 350% in the last year, and its rapid rise has outpaced other the other high-fliers.

But for Tesla and many momentum stocks, sometimes there's not an obvious reason for big price swings, said Scott Wren, Senior Equity Strategist for Wells Fargo Advisors.

"When the thing cracks, weak hands start to fold," he said. "There's a snowball effect, a get-me-out mentality."

Related: Investors aren't bringing sexy back

Wren said Tesla is an interesting stock for traders, but for long-term investors, its high valuation relative to its earnings is hard to justify.

"If a client's portfolio has over 5% momentum stocks, that's too much," he said.

And an argument can be made that after such a big run, a pullback is considered healthy. The stock is trading at 112 times 2014 earnings, after all.

  • Investors aren't bringing sexy back

    Boring is back.

    In a choppy market, investors are shifting their strategy, eschewing the once sizzling sectors (think: tech) in favor of the more mundane variety (think: utilities).

    Dividend-paying companies, long-considered a tad too defensive, are especially in vogue now.

    Red hot names such as Tesla (TSLA) and Netflix (NFLX) have tumbled this month, while utility stocks, known for their healthy dividends, have jumped. The Utilities Select Sector SPDR Fund (XLU) is up over 9% this year. Its top MORE

    - Apr 7, 2014 4:02 PM ET
  • Sexy is overrated. Dividends rule!

    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.

    Is it time for investors to do their best impersonation of the Virginia Cavaliers basketball team and play some stifling defense?

    Momentum stocks have had a miserable March. Just look at how poorly the Nasdaq and MORE

    - Mar 25, 2014 12:41 PM ET
  • Last year's darlings are 2014's dogs

    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.

    Best Buy (BBY) learned the hard way on Thursday that momentum is very, very, very fickle.

    Shares of the electronics retailer plunged nearly 30% after it reported disappointing sales for the holidays. In other words, it MORE

    - Jan 16, 2014 1:09 PM ET
  • Riding momentum isn't a sin

    This article was published in the December issue of Money magazine.

    By Paul R. La Monica

    Buy low and sell high may be the first rule of investing, but that doesn't mean you should invest only in poorly performing shares while ignoring stocks on a roll.

    If this year's market has taught you anything, it's that stocks that go up can keep climbing higher. In fact, history shows investing in the prior year's top-returning groups MORE

    Dec 18, 2013 7:59 AM ET
  • Has Tesla finally bottomed? Maybe?

    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 MORE

    - Nov 19, 2013 1:19 PM ET
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