With hardly any paper, opinions diverge more than with Tesla shares. For some time now, the paper has been in rally mode, shortsellers are making billions in losses. That’s why the Tesla bears could be wrong with their views.
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• Tesla stock is currently jumping from one high to the next
• Shortsellers make record losses
• That’s why Tesla bears could be wrong
The Tesla share is often considered to be very volatile paper and is particularly popular with shortsellers. According to CNN Business, 21 percent of the available shares are held by short sellers.
Tesla stock in rally mode
For some time now, the Tesla share has been in record mood – recently, the paper climbed above the $ 500 mark for the first time. As a result, more and more analysts are raising their price targets.
Shortsellers, on the other hand, have suffered severe losses recently. According to information from S3 Partners, they have lost a whopping $ 8.4 billion in the past seven months by betting against the papers of the electric car maker.
That’s why Tesla bears are wrong
Jeff Reeves, a columnist at MarketWatch, recently put together some arguments in his opinion that suggest investors shouldn’t bet on Tesla stock.
First, there is the market capitalization. “With the best of intentions, I don’t know why investors place so much value on comparisons between Tesla and other automakers like Ford. To what extent is this a relevant indicator that says something about where one of the two stocks is going?” Reeves puzzles. Because the market capitalization only says how a company is traded on the stock exchange. The actual company value, on the other hand, is completely different and this plays a much larger role. The market capitalization is therefore absolutely irrelevant in this context.
In addition, investors should not look too much at price targets. According to Reeves, the average price target for the Tesla share is currently $ 340 – almost 37 percent below the current level. “But it’s important to understand that price targets are set at a certain point in time, and a fast moving stock like Tesla has to be constantly re-evaluated.” However, some analysts are already raising their price targets. “So don’t interpret too much in someone’s $ 300 goal from nine months ago, as it could soon be revised up significantly,” the MarketWatch columnist said.
In order to understand why Tesla bears were wrong, the following points are also important. On the one hand, the car manufacturer’s forecasts are increasingly on schedule. Model 3 deliveries went well, growth was on schedule, and Musk was more and more achieving his ambitious goals. On the other hand, Reeves focuses on the expansion to China. China has become the world’s largest electric carMarket established in the world. With the recently completed production facility near Shanghai, Tesla now wants to strengthen its presence there and increase sales in China.
“Even if Tesla set its US sales to zero from here – which is almost impossible given the current growth rates – the company could double its sales in the next few years simply by opening up the Chinese market,” argues Reeves.
For these reasons, he concludes: “Short selling is for jerks”. “Perhaps the most important reason for everyone to rethink a bearish position at Tesla is that it is simply a money loss position.” From time to time shortsellers could be lucky with their positions and make a profit, “but in the long run the bears not only lose their last shirt, but also prove the bull case for this stock on a large scale through another epic short squeeze”, concludes Reeves.
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Image source: John Keeble / Getty Images, Ilkin Zeferli / Shutterstock.com, Scott Olson / Getty Images
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