Why Tesla Motors, Yelp, and SUPERVALU Sank Today

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Dow 16,000 and S&P 1,800 turned out to be intraday events only on Monday, as markets fell steadily from their early gains. The S&P 500 and Nasdaq actually turned negative on the day, and the Nasdaq's loss of almost 1% reflected losses in several major momentum stocks. Tesla Motors (NASDAQ: TSLA  ) , Yelp (NYSE: YELP  ) , and SUPERVALU (NYSE: SVU  ) were all posed severe losses of as much as 10%. Let's take a closer look at why these stocks dropped so much today.

Tesla dropped more than 10%, hitting its lowest level since July as the automaker faces an investigation at its Model S plant in California following an accident there that injured three workers. Combined with multiple incidents of fires following car crashes, Tesla has faced an unusual amount of negative publicity, and that has erased the momentum that the electric-vehicle manufacturer carried throughout so much of 2013. With potential shareholder lawsuits possibly coming in the near future and word pending on whether Tesla will have to recall vehicles, investors need to prepare for more volatility.

Yelp declined 9% in sympathy with other social media websites, including Facebook (NASDAQ: FB  ) and Twitter (NYSE: TWTR  ) , both of which dropped 6.5%. As with Tesla, Yelp and its social brethren have been among the biggest gainers recently, with Yelp having quadrupled so far in 2013 on the perceived promise of its restaurant and services review service. Yet as nervous investors start looking for reasons that the stock market could correct, high-flying stocks like Yelp are natural targets for taking profits to preserve hard-won gains this year.

SUPERVALU also fell 9%, with Goldman Sachs downgrading the grocery retailer. Among potential downsides that Goldman cited were cuts to the food-stamp program, which could affect the amount of discretionary income shoppers have to buy food from its store chains. Given the fragility of SUPERVALU's recovery after its massive split-off from many of its former chains, including Albertson's and Osco, it's reasonable that shareholders are pulling back from the stock, which is still up 150% on the year.

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  • Report this Comment On November 18, 2013, at 10:23 PM, oTeslaManiax wrote:

    Tesla is just taking a breather... and impact of a series of unfortunate incidents... They signed a deal with Paansonic for about 250000 vehicles over 4 years... they will rock in 2014 and 2015... CEO said Panasonic deal is the floor of their battery need not ceiling. When they announce their partner to build the giant battery factory it will be the end to oil stocks and ICE vehicles.. I suspect that an announcement is imminent. They repeatedly talked about the giant battery factory and Tesla involvement for 2 quarters now and highlighted that more than the quarter results.

  • Report this Comment On November 19, 2013, at 3:29 AM, plange01 wrote:

    tesla's drop in its stock is more like short sellers trying to manipulate it than a small plant accident or a car fire that happens hundreds of times a day in other cars around the world...

  • Report this Comment On November 20, 2013, at 9:04 AM, Gvick wrote:

    to quote the article "unusual" negative publicity... seems like lots of people are shorting Tesla stock, (the short float percentage is VERY high)

    An absolutely great play would be to never sell, buy more shares (at the current low price), and watch the 50% of people shorting this stock unjustifiably get squeezed. A sudden large investment in Tesla would easily double the share price in a big upswing due to short squeeze.

  • Report this Comment On November 20, 2013, at 9:06 AM, Gvick wrote:

    The real problem is the "unusual" negative press, but you notice every time Tesla has some good news the stock shoots upward. Shorts will get squeezed very soon.

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