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Tesla's Course Looks Destined For $150 Disappointment

Tickers in this article: AAPL F GM GOOG TSLA

NEW YORK ( TheStreet) -- When discussing the strength of so-called "momentum stocks," investors like to conveniently forget that "momentum" is a two-way street. No company exemplifies this better today than Tesla . While a dilemma remains as to whether the stock should be invested in or traded, one thing is clear; the high-end electric vehicle company has sputtered.

Shares closed Monday at $204.38 per share. Although the stock is up 37% year to date, Tesla has lost 22% of its value since shares peaked at $265 in February. Remarkably, this has occurred on seemingly no news. The reality is that no one knows how to value the stock.

Analysts not helped. Consider, of the 16 analysts that cover the stock, eight of them rate Tesla as a "hold." Only five of them have a positive rating. The remaining three believe Tesla stock should be sold. Or at best, they consider it "underweight."

Part of the confusion stems from the fact that some investors want to compare Tesla to technology companies like Apple and Google , while others believe it falls more along the lines of Ford and General Motors .

Rich Ross, chief market technician of Auerbach Grayson , thinks Tesla fits the criteria of a falling knife. Ross believes that Tesla is in danger of pulling back to its 50-day moving average, which points to a target of $150 per share, or a 25% lower than current fair value.

While Ross may be more bearish than most, there is certainly precedent for his prediction. Apple was once a momentum stock until its peak at $705 in September 2012. Apple stock went on to lose more than 40% of its value in a matter of months. Shares of Tesla peaked at $265 in February. A decline to $150 per share would equate to a fall of 43%.

While Tesla may be suffering from a short-term overreaction, the more pressing question is about the future, and specifically what CEO Elon Musk can do to save his stock from this perpetual share-price recall. For investors, is it time to profit off of this fear or risk catching a falling knife?

Concerns of slowing growth are not going away, even though management, by virtue of the company's Gigafactory plans, hints that growth is here to stay. Tesla plans to go mainstream. To that end, the company has talked about producing a more affordable electric car. What's more, by 2020, Tesla expects to produce and sell 500,000 vehicles per year. For some context, last year it produced 22,500.

Calling these goals aggressive would be an understatement. But aggressive growth is what investors have paid for. The stock has soared more than 500% in 18 months. And even with this recent decline, the stock is still trading at a P/E well over 100 based on 2014 estimates of $1.80 per share. So aside from growth, this valuation presumes perfect execution. The company can't miss estimates going forward, or the stock will be punished for it.