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Tesla's Punishment Is No Accident

Investors cheered these aggressive goals when they were announced over the past year. Tesla's growth capabilities explain why the stock became one of the best momentum stories on the market. But aggressive goals aren't cheap.

It wasn't all about spending, however. Recall, Tesla also had to deal with Model S battery fires, which prompted a government investigation. As it stands, Tesla also incurred costs to install additional safety equipment on its new and existing cars.

To that end, I don't believe Tesla's earnings results were as surprising as some investors are making them out to be. The company telegraphed these numbers several quarters ago.

The good news is that, while reiterating its plan to sell more than 35,000 cars this year, the company said it expects to deliver 7,500 Model S sedans in the second quarter. All while expecting production to increase 13% to 19%.

Tesla will continue to be a polarizing story. Shares closed Wednesday at $201.35. The stock was down close to 8% in after-hours trade to around $186. The stock was at $189.61 as of 10:40 a.m. Thursday.

This has all of the makings of an overreaction. But with negative momentum on its side, it's best to wait until the dust settles.

>>Read More: Stay Away From Infosys

>>Read More: Video: Silver Volatility Hits a Decade-Long Low, and Here's How to Trade It

>>Read More: Why HP May Be Next Cloud Bubble to Pop

At the time of publication, the author held no position in any of the stocks mentioned.


This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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