Tesla Inc Stock Hits Record High: Short-Sellers Are “Playing With Fire”
Tesla stock hit a major milestone on Tuesday, passing $300 a share for the first time since the company went public. The company also became the most valuable U.S. automaker as it surpassed General Motors by market capitalization just days after passing Ford. At the current valuation, Tesla’s market cap is approaching $53 billion, compared to GM’s market cap of nearly $50 billion and Ford’s roughly $45 billion market cap.
Is a short squeeze on tap for Tesla stock?
Indeed, this is one story that’s far from over, as Tesla stock has skyrocketed 20% just over the last couple of weeks. Chaim Siegel, an analyst with the global financial platform Investing.com, thinks short-sellers could be about to be blown away.
“What’s fun about following this company now is that anything can happen,” he said in an email. “The potential is huge. The hopes are huge. As Model 3 ramps and jumps the sales numbers, those hopes can start to factor into earnings hopes for next year. That, combined with 25% of the float short, could mean this stock is about to catapult. We think the shorts are playing with fire ahead of this. They may not have much confidence in management, but if the company is close to targets, look out shorts.”
Crazy, or just bullish?
He noted that Tesla expects production capacity to reach 500,000 vehicles next year, but he doesn’t feel that it would be crazy to think the company can pull it off. He also pointed out that the company expects to product 5,000 Model 3 cars by the end of this year, but he feels that the company could just be guiding conservatively. He also feels that if the company reaches volume production on the Model 3 this year, then next year is all that matters for Tesla stock.
“We’ve seen that the stock does not solely move on earnings. We think the stock moves on the visibility of the outlook,” he said. “We expect that visibility to build as Model 3 is produced and sells because the ramp for 3 is much greater than for Tesla’s other models.”
Short interest in Tesla stock soars
CEO Elon Musk mocked short-sellers on Twitter this week as his company’s shares soared on the news that first quarter deliveries were better than expected, but despite this, short interest in Tesla stock is still climbing steadily. Ihor Dusaniwsky of financial analytics firm S3 Partners said on Monday that total short interest in the name is up 22% for the year to $8.9 billion. Unfortunately for short-sellers though, their mark to market losses are still piling up.
He said short interest dipped to $5.5 billion in October but has been rising steadily since then, right in step with Tesla stock. Last year, short-sellers lost $354 million, but this year is shaping up to be much worse for them. Before yesterday’s and today’s gains, short-sellers were down $2.25 billion on an average short of $8.3 billion, Dusaniwsky explained.
Monday’s gain tacked another $488 million onto those losses, and then today’s gains are just making things even worse.
Shares of Tesla stock rose by as much as 1.47% to $302.92 during regular trading hours on Tuesday.
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Source: valuewalk