Tesla Motors Inc (TSLA): The Pullback Heats Up

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March 31, 2014 12:57pm NYSE:GEX NYSE:PEZ

buyers and sellersProfit-taking continued in Tesla Motors Inc (NASDAQ:TSLA) this week, as part of a broader pullback in momentum stocks.

TSLA closed lower each day, and for the whole week (from close of trading Friday, March 21, 2014 to close of trading Friday, March 28), TSLA fell 7.22%.

The overall market fared better over the same time period, with the Dow rising 0.12%, Nasdaq falling 2.83%, and the S&P 500 falling 0.48%.

Tesla has been battling in several states against owners of car dealerships, who have been using their political clout to try to ban Tesla from selling its cars directly to consumers.

Recently, New Jersey banned direct sales, and Arizona introduced legislation favorable to Tesla.

This week there was more news about the dealership battles. In Washington state, legislators proposed a compromise between Tesla and the dealerships that would enable Tesla to continue to do business in the state.

Ohio is also seeking a compromise, with state legislators proposing a bill that would ban direct sales — but with an exception that would allow Tesla to operate three direct-sale stores. (Related: Tesla Motors Inc (TSLA): Price Target Set To $320)

Texas, which had previously banned Tesla’s direct-to-consumer sales, is now having second thoughts. Like Arizona, Texas is in the running to be selected as the site of Tesla’s soon-to-be-built $5 billion Gigafactory.

The Governor of Texas told FOX News that he thought the pros of allowing Tesla to use its direct selling model within his state would outweigh the cons, and he told the Dallas Morning News that he wants legislators to have a “very open, thoughtful conversation” about the issue and to “revisit” the “antiquated protections” for car dealers.

So things are looking good for Tesla in at least several states.

Meanwhile, the fallout in New Jersey continues following that state’s recent ban on Tesla’s direct sales.

The state gave Tesla a 2-week extension that moves the deadline to stop direct sales from April 1 to April 15, and a bill was introduced in the state legislature to overturn the ban. (Related: Apple Inc. (AAPL) Possibly Acquiring Tesla Motors Inc (TSLA)?)

The stock took a hit when the president of Panasonic (OTC: PCRFY) said his company hadn’t committed to investing in Tesla’s Gigafactory.

Following that announcement, Wedbush Securities lowered its price target on TSLA from $295 to $275 (which is still substantially higher than were the stock is now).

Despite lowering the target, Wedbush did maintain its “outperform” rating for TSLA, with an analyst saying they “see strong positives in Tesla’s ….path to longer-term battery cost” and “the company is well positioned to deliver an aggressive volume ramp.”

In good news for Tesla, the National Highway Safety Administration closed its investigation of several recent fires in Tesla’s Model S cars, saying, “A defect trend has not been identified.” (Related: Tesla Motors Inc (TSLA): Price Target Set To $320)

CEO Elon Musk also announced that Tesla has been installing titanium shields in the cars since March 6 to bring the risk “down to virtually zero.”

PowerShares DWA Consumer Cyclicals Momentum Portfolio (PEZ)

Does the recent drop in TSLA’s share price present a great buying opportunity? (Related: Apple Inc. (AAPL) Possibly Acquiring Tesla Motors Inc (TSLA)?)

Or will the stock continue to fall to lower levels? One way to invest in TSLA without taking on the risk involved in buying a single stock is to invest in PEZ, an ETF that has 3.62% of its holdings in TSLA.

By Michelle Cook, ETF Daily News

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