Why the Stock Market Punished Shares of Tesla Motors Inc (TSLA)

Investors sold off shares of Tesla Motors Inc (NASDAQ:TSLA) on Tuesday, sending the stock down nearly 9% to around $116 a share at the time of this writing. That’s a steep decline from where the electric-car maker’s stock was trading earlier this week at $133. The sell-off comes on the heels of an analyst note from Goldman Sachs Group, Inc. (NYSE:GS), in which analyst Patrick Archambault pegs Tesla Motors Inc (NASDAQ:TSLA)’s fair value at an averaged price of $84 per share.

However, before you panic, let’s take a closer look at why this is of little significance to long-term investors.

Behind the sell-off
Shares of Tesla have climbed as much as 275% on the year. Therefore, it was only a matter of time until investors took some gains off the table. Tuesday’s move, however, is compliments of Archambault’s three-tiered approach to valuing the stock. The analyst laid out his bearish, bullish, and baseline scenarios for the stock, taking the average between them to arrive at his $84 target price.

As one of the best-performing stocks so far this year, there’s no doubt that Tesla Motors Inc (NASDAQ:TSLA) has been trading at a lofty valuation relative to earnings. However, if you’re currently invested in Tesla, you should be prepared to be in this name for the long haul. That’s because we’re still in the early stages of a very promising growth story.

The company continues to ramp up production on its acclaimed Model S car, and has plans to release its first all-electric SUV, the Model X, next year. Last week, Tesla Motors Inc (NASDAQ:TSLA) CEO Elon Musk shared with Bloomberg his confidence that the EV maker could increase its production pace to 800 vehicles a week in 2014, twice as good as the company’s initial goal of 400 a week. This is a big piece of the puzzle for Tesla.