What do investors who are still “shorting” Tesla think after the fiasco?

On February 18th Adam Jonas, an analyst at Morgan Stanley, raised Tesla’s most optimistic target price to $1,200 from $650. It was a sharp turn by the Tesla’s big short. It is understood that the “most optimistic target price” is based on Adam Jonas’s “radical assumption” that Tesla will deliver 4 million vehicles by 2030, accounting for 30 per cent of the global electric car market.

(Adam Jonas also raised the base and most pessimistic target price, raising the base target price from $360 to $500, and the most pessimistic target price from $115 to $220.) )

Tesla’s share stake has started a wave of highs this year, up more than five times from last year’s lows, helped by better-than-expected results and deliveries in the fourth quarter, while Tesla’s valuation has exceeded $150 billion, surpassing Volkswagen’s bid to push Toyota, the world’s largest car by market capitalisation.

More and more people are beginning to see and be optimistic about Tesla’s “potential point” in the Chinese market, the value of Tesla’s differences with traditional car companies, the broad prospects of Tesla’s energy business, and even the headlines and beliefs that continue to drive up share prices.

On the contrary, it was a disaster for those who shorted Tesla’s stock.

Short sellers lost about $2.6 billion in the first two weeks of 2020 alone, according to Ihor Dusaniwsky, head of forecasting analytics at Financial Institutions S3 Partners. “This new year is not happy. The Wall Street Journal reported that Tesla’s rising stock price had cost the “short” a total of $8.4 billion in five weeks.

由于特斯拉股价飙升,卖空者遭受了损失 | YahooFinance

But interestingly, the shift for Adam Jonas, an analyst at Morgan Stanley, is just one example, and Tesla’s shorts have not diminished. In February, Tesla overtook Apple to become the most shorted U.S. stock, based on short interest rates or the amount of dollars it borrowed to bet on, according to S3 data. About 45 percent of analysts currently give Tesla a “sell” or “low”rating, according to FaceSet.

Even Citron Research, which has been shorting machines, tweeted, “We love TSLA and promise not to go short again.” But when computers started to drive the market, we believed that even if Elon was a fund manager, he would short the stock. It’s no longer about technology, it’s become the new Wall Street casino. “

After years of fighting Tesla, from the original Ponzi scheme to today’s “collective illusions,” Tesla’s short-term ideas have gone through a baptism.

Now, after the fiasco, what do the Tesla shorts think after the fiasco? What are these “value destroyers” in Musk’s mouth?

Escape from the Cult

In the famous film “The Big Short,” The Prototype of Mark Baum, the small private equity executive of “Three Shorts”, was Steve Eisman of FrontPoint Partners LLC at the time.

In reality, the famous “big short” Steve Eisman is also one of Tesla’s shorts. In an interview with Bloomberg Television, he said he had filled Tesla’s short position “some time ago”, but Tesla had risen 300 percent in six months.

“Everyone has a painful standard, and when a stock is not constrained by valuationbecause of some dynamic growth and has a cult-like impact, you have to leave it,” says Eisman, who has reached the limit of pain and stopped betting on Tesla.

Another Tesla short, Andrew Left, a well-known short seller at Champs-Elysees, said he was back to the promise he made in 2018 and would never compete with the stock again.

The parabolic rally in Tesla’s stock has scared some short-sellers, but others seem to be “more aggressive in Vietnam”.

“We’re still empty.”

“It’s a car company, it’s a high-end company, but it’s still a car company with as low margins as any other automaker,” said Jim Chanos, president and founder of the famous Tesla big short Kynikos Associates. He added that Tesla’s recent profits reflect sales of its tax credits, not the actual sales of cars.

“Tesla has been and remains one of our biggest and best short positions, and we are still short. “But contrary to some short-faced views, Tesla is unlikely to face an imminent bankruptcy, ” Mr. Chanos said.

Mr. Chanos said Tesla’s share price rise reflected “just the market’s view of all the great products of the future” that may not be successful. Tesla is known to account for about 2% of The Chanos hedge fund’s total investment.

In the eyes of these shorts, Tesla has to overcome a lot of “assumptions”. If the value of the stock stabilizes, or continues to rise, Tesla needs to do it: launch the Model Y without falling into mass-production hell; keep consumer demand strong; win competition from electric trucks; continue to add innovation to its software; continue to add innovation to its energy business; and so on, each of these is a daunting task.

For now, the most important “hypothesis” to be realized is that Tesla still needs to make a profit for four consecutive quarters.

An important reason for Tesla’s sharp rise in stock prices over the past six months was that it made a big profit in the third quarter of 2019 and held on for the rest of the quarter. “So far, the loss quarter has been many times the earnings quarter, and Tesla has yet to prove that these profits will be more than just cyclical gains. “GfM Asset Management investment adviser Tariq Dennison wrote in his bearish reasons.

Tesla’s Past Earnings . . . YCharts Data 

Despite the huge losses, there are still many shorts to insist on. Mark Spiegel, a hedge fund manager, is one of them, and although he has reduced the size of his shorts, he remains convinced that Mr Musk’s House of Cards will one day collapse.

The shorts are looking at Tesla with a magnifying glass, which also gives them a deeper picture. Tesla’s fourth-quarter 2019 results show that overall, Tesla’s revenue grew 2.2 percent in the fourth quarter and 14.5 percent for the full year 2019. But Tesla’s revenue in the U.S. fell 34 percent, compared with a 39 percent decline in the third quarter.

“This shows that the company has no commercial momentum in its largest and most important market. In fact, Tesla’s full-year U.S. revenue for 2019 is 14.9 percent lower than in 2018. Judging by the stock price chart of Tesla’s stock, no one would have guessed that. Market analyst Jim Collins said.

Other sceptics, including activist short-seller Andrew Left and former presidential candidate Ralph Nader, have warned that Tesla’s growth is unsustainable.

“Irrational exuberance”

Tesla’s high valuation has earned it more “negative reviews”, with many saying the company’s surge represents an “irrational exuberance” that usually precedes a stock market crash.

Most analysts call the current share price “absurd” and insist there is no reason to justify Tesla’s valuation of nearly $150 billion, 58 percent higher than the market value of global sales leader Volkswagen. Ralph Nader, now a consumer advocate, argues that Tesla’s stock is grossly overvalued.

“Every time you hear a positive news, you think you’re right. Gordon Johnson, founder of GLJ Research, says.

In the eyes of the shorts, Tesla’s supporters looked at the company with tinted glasses, masking dangerous signals. For example, suspicious consumer demand abroad, Tesla’s debt and the fact that the company has not yet made a full profit.

Taking Last year’s production of 367,500 vehicles, for example, many investors and analysts were heartened. For a short-time man like Johnson, the numbers are not impressive. “It’s not surprising that it’s still at the lowest target,” he said. Deliveries fall far short of Musk’s higher target of 420,000 to 600,000 vehicles promised by reporters last year. “

“To my surprise, all of Tesla’s fans went crazy,” Nader said in an interview. “

“It’s a company with no middle ground, and optimists see its potential as limitless, while pessimists see it as a time bomb that is destined to explode. Aswath Damodaran, a finance professor at New York University, wrote on his blog.

In fact, the least likely thing for many of Tesla’s shorts is Tesla’s high debt levels, which not only put Tesla at risk of a downgrade, but even put the company at risk of expansion. “If Tesla uses equity instead of debt, it will be in a financial position,” Damodaran said. “

“It’s like a party, and the party’s wine glass is thrown with stimulants?” Robert Luciano, a portfolio manager at VGI, asked cautiously on a earnings conference call last week. “It does feel like that. “

Tesla’s current valuation suggests that investors believe the company can sell as many cars as Volkswagen, or that it can make more money by reducing the number of cars it sells, a assumption that short-sellers describe as “highly speculative”.

Especially for those who believe that annual car sales around the world have reached a “peak”, they have to expect a big part of Tesla’s future revenue growth to “grab” the market share of other car makers of its main rivals. They include Toyota of Japan, Volkswagen in Germany, and General Motors and Ford in the United States. The four companies now have combined annual revenueof s $800 billion, while Tesla’s 2020 revenue is estimated at about $30 billion.

Car giant’s last 12 months of revenue comparison YCharts Data

Speculative Tide and Collective Illusion

At any time, there are small but fast-growing investment ideas that are becoming trending, attracting a large number of investors on Wall Street.

Marijuana stocks, blockchain trends have been such as this “investment trend.” But these stocks tend to grow not just by the fundamentals of investment, so they are ideal for speculation.

On the face of it, the Tesla TSLA has the same heat as other big trend ingress. After all, it’s a volatile stock, and bullish investors tend to rely on storytelling and big trends to support their decisions, rather than traditional fundamental analysis. There’s even an account on Twitter @Teslaconomics (Tesla Economics).

Since the initial public offering in 2010, Tesla has returned more than 2,500 percent, more than 12 times the return of the SPX of the Standard and Poor’s 500-stock index. It looks like Tesla is a worth trading stock, not a wave of speculation.

There is no denying that Tesla is probably one of the most polarizing stocks in the market today.

As it turns out, the risk of shorting Tesla is very high. But the “gambler mentality” is that the current short or buying A lyin options for Tesla is more profitable than buying Tesla’s stock. And there will always be people who believe that a share price crash is more likely.

And Tesla’s shorts are looking at other “special data” – for example, who’s buying TSLA stock?

Shorts will look at who is trading their company’s stock in order to re-examine their judgment. Insiders have sold more than 100,000 TSLA shares in the past three months without buying them, according to Nasdaq. In the past 12 months, insiders have sold almost four times as much stock as they were.

Of course, these shorts are not looking at “insider trading”, but rather seeing more “internal confidence” through operations such as employee options trading. The most recent “internal buy” deals seem to be options trading rather than open-market purchases.

In an updatelast assessment last month, Ark Investment seine Cathie Wood wrote: “Based on our latest expectations for the cost and demand of electric vehicles (EVs) and our estimates of the potential profitability of robotaxis, we TSLA’s expectation per share is $7000. “

2020年1月7日,在中国上海的工厂举行的交付活动 | 特斯拉官方图片

That means Tesla’s market value will exceed $1 trillion over the next four years. So far, the U.S. companies with a market capitalisation of $1 trillion are Microsoft, Apple, Google and Amazon. “Their business barriers, profits and reach are much better than Tesla’s automotive and battery business. “GfM Asset Management investment adviser Tariq Dennison said.

“TSLA is a manufacturer operating in a more cyclical industry that requires sustained capital investment to develop and manufacture new products (otherwise obsolete) to sustain growth, rather than a corporate model that benefits from software/service profits and selling profitable advertising or platforms,” said Joseph Spark, an analyst at RBC Capital Markets.

The problem is that companies like Apple, Amazon and Google are fundamentally different from Tesla. To reach the current valuation of Tesla’s stock, investors must believe that Tesla can dramatically increase its profit margins and free cash flow through self-driving software. Clearly, tesla shorts, including Spark, now think it’s hard to do.

On Twitter, Tesla’s shorts have a special hashtag, $TSLAQ, which is Tesla’s stock code (with the Q logo on its original code) after filing for bankruptcy. And that’s what the shorts and Tesla advocates have to call on Twitter to “talk and get in touch.”

网友讽刺特斯拉引发了新一轮的“淘金热” | Twitter @RealEV1

The value of a company’s investment depends to a large extent on its future goals, so the divergence between investors and analysts stems not only from different points of view, but sometimes from different facts.

Tesla has both “potential” but is equally worrying. The original intention of this article was not to promote a “blackness”, but to see how the other side of the story exists and which shorts think after everyone preaches bullishness, or even investment victories.

This article does not have investment advice, but is just a point of view of Tesla’s rationality.