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  • Tesla Bubble is Bringing New Short-Sellers

    Tesla Bubble is Bringing New Short-Sellers

    Tesla’s Bubble is Bringing New Short-Sellers
    Tesla stock rose an incredible 17% on Tuesday, but Morgan Stanley recommended selling Tesla for the first time since 2012.

    UPDATE 07/02/20:

    Yesterday 47 million shares of $TSLA traded at an average price of $750/share – equating to a nominal value of $35 billion. The last price was $748.96 on February 7.

    Tesla bubble is turning heavy bulls into short-sellers.
    The short-seller Andrew Left’s Citron Research tweeted: “even Elon would short the stock here if he was a fund manager.”

    Tesla’s (NASDAQ:TSLA) rally has seen the stock double in 2020 alone. The company’s market cap is over $160 billion. Great news to CEO Elon Musk and his bonus.

    The surge is getting headlines but what caused this change? Actually nothing. Tesla’s revenue growth dropped in the last quarter. The traders recognized it as a Tesla bubble and it isn’t surprising that a lot of them want to short it. 

    One is Citron Research as we mentioned.

    In a tweet posted on Tuesday, Citron Research said that they were shorting the stock again. Citron changed its mind after the recent run, despite their earlier statement that they would never do it again.

    On Thursday, even Morgan Stanley recommended selling Tesla for the first time since 2012. The bank downgraded Tesla to “underweight” from “equal-weight.” This new rating came at the time of a record rally for Tesla. Morgan Stanley also recognized rising downside risks. Shares of this electric-vehicle maker dropped 4% in early trading Thursday. It looks that traders who bet against Tesla’s victory are the ones who have to push the share price higher. What an irony! 

    Tesla bubble causes fears. How is that? Can you recall bitcoin’s surge back in 2017? Exactly. 

    The climbing for shares of Tesla provokes some investors to compare this jump to the bitcoin bubble. Tesla’s shares have grown 36% to a record price of around $887 in the last two sessions. This Silicon Valley favorite has jumped 180% during the last three months. Just to give you the right perspective,  on June 3 Tesla’s traded low at $178.97, on February 4, Tesla’s shares have gained almost 395%.

    And now Andrew Left said he’s betting Tesla will go back down. For the market winner 2020? Also, Michael Novogratz compared the surge in Tesla to bitcoin’s likewise parabolic progress.

    The gains have come too greatly, too wild

    The parabolic rally put shares up 21% Tuesday, after a 19% increase Monday. That put gains at over 100% for the past 12 months.  Bulls are clapping the record run, but short-sellers are also measuring in on what’s next for the electric car-maker. 

    But Citron Research doesn’t think the company is bankrupt, Andrew Left said Citron is shorting Tesla only because of the valuation.
    Citron Research tweeted more: “when the computers start driving the market, we believe even Elon would short the stock here if he was a fund manager. This is no longer about the technology, it has become the new Wall St casino.”

    Morgan Stanley downgraded shares of Tesla to “underweight” 

    Now it is the “sell” rating. Tesla gets this rating from Morgan Stanley for the first time after seven years. According to Bloomberg, in September 2012 Morgan Stanley gave a selling rating to Tesla. This one came after a record rally and amid optimism about Tesla’s China factory. The bank saw the problem in “sentiment around the stock” that is “admittedly very strong, but we ultimately question the sustainability of the momentum.” 

    Morgan Stanley also lowered the valuation for the company’s mobility unit and increased the expectations for the core auto business. That resulted in a higher target price. 

    Why Tesla Bubble?

    Tesla’s current valuation is more downside risk for the stock than upside. Even the company’s increased price target from $250 to $360 indicates a 30% downside from the last trade price on Wednesday.

    Also, the optimism around the China factory had a great influence on Tesla’s stock. The problem is that the risks are not entirely recognized.

    Adam Jonas of Morgan Stanley in his Thursday note wrote that investors “continue to harbor concerns whether an auto business commercializing advanced, dual-purpose technology in economically sensitive industries could be a long-term winner in the Chinese market.” 

    Tesla has entered into the bubble-zone, everyone is following what’s going on with it, even the people who are out of the stock market are reading news about Tesla’s stock price. And cheering. The surge was too fast, too far. That’s why it looks like a bubble. Who is surprised by short-sellers’ appearance now?

    What is a bubble?

    A bubble is when the fast rise of asset prices is followed by a shortening. It is generated by a surge in asset prices and driven by an enthusiastic market reaction. When fewer and fewer investors want to buy at a high price, a massive sell-off happens. That causes the bubble to decrease. After the new Morgan Stanley’s gave Tesla shares a “sell” rating it is quite possible the stock price will fall quickly. That is the situation with Tesla stock. The share value grows beyond asset value. So,  investors withdraw their money faster in fear that supply will exceed the demand. That could cause the share price to drop.

    Tesla’s 2020 rally has been strong. The stock was all the time very high and reached new all-time highs each week. But on Tuesday investors assumed that holes may arise whenTesla fell by over $100 just 15 minutes before the closing bell. This drop was followed by a large volume, implying that it wasn’t quite a healthy correction. Yes, TSLA finished the day up 17%, but the mini-drop was visible. It looks like the air is coming out of the bubble. 

    Bottom line

    Everyone should be skeptical when such a massive run in stock in a short time with very few visible reasons, appears. If we have in mind the recent rise of retail ownerships, we must consider that the further drops for Tesla stock are near. 

    Citron’s current change on Tesla stock can be accurate as the last one was. As an illustration, according to Bloomberg, Tesla overtook Apple as the most shorted US stock and analysts have bearish ratings on the asset. Everyone is predicting TSLA short squeeze. That can be right but on the other hand, it is more likely this stock price will decline slowly. Increasing short selling is more possible than a sharp fall. One of the analysts, Ihor Dusaniwsky said: “This is due to the amount of short hedging that is being done to offset Tesla convertible bond and options exposure.” 

    Before Tuesday’s rally, Tesla short-sellers had taken a $2.89 billion loss last year and a loss of $8.31 billion from the beginning of 2020. 

    Tesla shares were trading 12.73% higher at $879.30 on Tuesday.

    By the way, analysts that cover Tesla, predict the average price target is $506, which is around 35% below the closing price on Monday.

    But who can predict the market’s movement or what Elon Musks’ next move?

  • Shares of Tesla Hopped On Monday

    Shares of Tesla Hopped On Monday

    Shares of Tesla Hopped On Monday
    Investors are expecting that a draft bill for an updated EVs tax credit could become law.

    UPDATE 18/12: Tesla stock closed up 3.74% yesterday and was priced $393.15. It was a new all-time high. Over the past 6 months, TSLA rose by almost 74%, making it up 11% in the last five days alone and up 60% over the last 3 months.
    TSLA is on pace for its best quarter.
    Last time, the stock was near these levels last year after the “funding secured” failure of last year.

    What’s behind this bullishness?

    Bloomberg reported Wednesday that the company is planing cutting the price of Tesla’s China-built Model 3 sedans by 20% or even more. The next few weeks will be interesting.
    Take a look at the new chart.

    Shares of Tesla (NASDAQ: TSLA) hopped on Monday, approaching their all-time high and were up 6.45%.
    The stock jumped on the investors’ belief that House Democrats are going to vote on a bill that would renew the federal tax credit for purchasers of EVs. The news triggered the stock price.

    Shares of Tesla Hopped On Monday

     

    General Motors Company (GM) shares marked the rise in price after a sharp decline in November. The stock price rose by 1.29% Monday.

    The new draft energy tax package supported by Congressman Mike Thompson would increase the limits on the federal tax credit for EVs.

    The current tax credit is not available to buyers when a producer has sold 200,000 EVs in the U.S. That number was reached by both Tesla and General Motors. 

    The updated credit would begin to phase out after the producers reach 600,000 EV in sales. Moreover, the tax credit deductible would be decreased from $7,500 to $7,000. This would provide this benefit to more EV buyers.

    The bill is called the Growing Renewable Energy and Efficiency Now (GREEN) Act. It is expected to increase demand for Tesla and General Motors EVs. But nothing is officially finished yet. The investors should wait for it. But it looks that they are pretty much assured that the renewed tax bill will become the reality.

    A tax-credit extension was asked by Tesla

    Many of the companies and groups that had earlier lobbied on similar acts of extending the credit, all settled on the “Driving America Forward Act” as their prime goal.

    The current tax credit, first passed in 2008 and revised in 2009, increased buyers’ interest in EVs and also urge the production.

    But it looks like the industry demands a new portion of the support.

    Tesla hit the 200,000 in sales, and without a new tax-credit bill, it is hard for the electric vehicle maker to grow further. Earlier this year Tesla’s sales have dropped since its per-vehicle credit decreased to $3,750. The tax credit was lowered to $1,875 in July again.

    Shares of Tesla are rising

    Tesla stock is rising, up more than $23, or 6.5%, in Monday trading. That’s a new 52-week high. But why shares are rising nobody knows for sure.

    The new U.S. federal EV tax credits law seems to be the only reason for investors’ optimism.

    Tesla is a heavily-shorted stock. The investors borrow shares and trade them, speculating on price drops. That could create more stock volatility. 

    Closing at Monday’s prices was the highest close since August 7, 2018. On that date, shares were closed at $379.57. Moreover, shares are increased by more than 110% from their 52-week lows of $178.97 on June 3, 2019. It has been an extraordinary run.

    Shares of Tesla are up about 14% per year but Tesla stock is up nearly 57% over the last three months.

  • Tesla Cybertruck: It is not ball proof, but maybe it is bulletproof

    Tesla Cybertruck: It is not ball proof, but maybe it is bulletproof

    Tesla Cybertruck

    Tesla Cybertruck didn’t pass the metal ball test proof
    The company has always tried to meet auto-industry standards, which Elon Musk called “production hell.

    UPDATE 2019/11/25: Was it an embarrassing public presentation last week or just good marketing? Everything is possible. But one of three investors is sure that Tesla’s Cybertruck has a chance to be successful.
    After Elon Musk tweeted that the company received over 200,000 orders for the futuristic truck the stock price jumped for 0,99% on Monday and it is currently $336.34. The rumors increased the stock price. Take a look at the chart.

    Tesla Cybertruck didn’t pass the iron ball test. Are the broken windows the cause of dropping TSLA stock price? During the presentation of the new Cybertruck, something went wrong or the producer didn’t test the model enough before it showed it to the public? Anyway, it was hilarious. Okay! Musk tweeted after the reveal of the new model:

    “We threw the same steel ball at the same window several times right before the event and didn’t even scratch the glass.”

    The demo on late Thursday included hits with a sledgehammer and bullets that the truck could resist. But something went wrong as the windows broke into a thousand pieces when faced with a metal ball. It didn’t pass, though.

    And on that very day, the stock price dropped by 6% to $333.04 and Musk’s net worth plunged $768m after glass failure went viral. The launch of the Cybertruck experienced a delay since its “armored glass” windows shattered. And Wall Street was worried on Friday.

    Tesla Cybertruck

    The idea of Tesla Cybertruck is good? 

    It is constructed from stainless steel, a triangular structure and the base-model truck price is under $40,000. That should point out that Tesla is lowering battery costs. If we put aside the math (can be complicated) we will have a simple conclusion: someone is making EVs under $40.000. 

    There will be three models, the cheapest of which, at $39.900, mid-range model,  is priced at $49.900, and the most expensive at $69,900 that will start production in 2022.
    Electric vehicles are more costly than classic cars powered by internal combustion engines due to the battery pack. 

    However, refueling an EV by plugging it in is cheaper than with gas. And here we come to the pricing. The cost under $40.000 is a powerful promise. It looks the high battery costs are dropping. 

    But Tesla stock didn’t drop just because it had been higher. Over the past 3 months, the stock price has risen by almost 50% because the third-quarter results were better than expected. However, the drop on Friday looks to be related to the presentation of the Cybertruck and broken windows.

    The Robert W. Baird & Co.’s senior analyst, Ben Kallo is positive about Tesla stock, he rated it as Buy and set a target price at $355. 

    “While some may consider the Cybertruck too futuristic of a design,” he wrote in a Friday research report, “we do think strong functionality will eventually win over Tesla loyalists and enable the company to take share from traditional auto OEMs.” 

    Competition is big

    Ford is working on all-electric F-150, General Motors will enter the market in two years. Moreover, Ford and Amazon supported EV startup Rivian that also will bring something in 2020.

    The analyst Jed Dorsheimer from Canaccord Genuity kept a buy rating on Tesla stock and a price target of $375.

    But Oppenheimer analyst Colin Rusch wrote he expected Tesla stock to fall because the investors might be skeptical of adoption of the Cybertruck.

    Yes, this vehicle is very different from current standards. So, what? Is that a problem?

    We think it isn’t. The main Tesla problem is that it isn’t a carmaker in, it is an innovator. They really should engage some constructors and workers with experience in the auto industry to build them a producing line. The industry veterans know that. Last year, Tesla’s factory in California couldn’t assemble the Model 3 sedan. 

    Maybe it is time for Tesla to follow the auto-industry practices and engage the experts in that field. At least, it will give fewer downturns and mistakes in the construction of their cars.

    Bottom line

    Recently Musk said the goal of Tesla is to create a system that provides “the most amount of fun you can have in a car.
    And Tesla added a “Caraoke” library of songs and lyrics, there are more games in Tesla Arcade. A partnership with gaming company StudioMDHR for its game Cuphead is signed. So, full entertainment is here. Where is the car?

    Tesla’s Cybertruck obviously didn’t pass the metal ball test. Will the stock survive that hilarious experiment? This EV maker is spending a lot of time on something the other car makers have almost led to perfection.

    That can make larger trouble in its business. Anyway, after the fiasco, Musk tweeted: “Guess we have some improvements to make before production haha.” Yes, you have, indeed.

  • Tesla Stock Jumped on Thursday the Most In the Past Six Years

    Tesla Stock Jumped on Thursday the Most In the Past Six Years

    Tesla Stock Jumped on Thursday the Most In the Past Six Years

    Tesla’s stock had its best trading day on Thursday since May 2013.
    The third-quarter was profitable and better than anticipated
    The investors are sure it is the beginning of rising to $4,000

    Tesla’s stock jumped big on Thursday after the company had a surprisingly profitable third-quarter. The turn came from excellent progress in its Shanghai factory and that caused the stock price to rise. Also, the fact that the company is making cash and boosting margin has influence.

    Tesla shares rising about 17% during yesterday afternoon’s trading and gain $298 per share. The traders that shorted the stock or were betting it will decrease in price, lost almost $1,4 billion, is S3 Analytics estimation. The closing price was $299.68, and 17.67% of rising was the confirmation of the stock’s best single day of trading since May 2013. 

     

    Tesla Stock Jumped Opposite to Wall Street Expectations

    This was surprising for Wall Street analysts too, they showed more optimism about Tesla’s future in the light of new stock price.
    But even with the opening price of $300 (the last time is seen in February this year) the stock continued negative for the year, down 10% for 2019.

    The important fact is that Tesla had good free cash flow in the last quarter. The company had a steady growth in overall earnings and sales. Having in mind that the auto industry is lowering it is a real success. 

    Distrust in Tesla

    Maybe the best example of distrust in Tesla arises on Wednesday just before the Q3 earnings report. ARK Group DMCC sold 150,000 Tesla shares but later they stated CNBC that its “conviction in Tesla has not changed” and that Tesla is still one of the most important holdings in Ark’s traded funds. The selling of Tesla shares was explained as “a portfolio management thing.” There are some rules related to Ark’s funds that say that no single stock can be more than 10% of their portfolio.

     

    You might be interested: The Boys Are Not All Right

    Bottom line

    Tesla stock jumped on Thursday while investors were amazed by the company’s third-quarter earnings report.
    The day before, the automaker reported improved third-quarter earnings per share of $1.86. That is less than $2.90 in the previous year, but it is above Wall Street expectations of a loss of 46 cents. Tesla made a revenue of $6.3 billion for the quarter.
    It returned to profitability and recorded positive free cash flow. Tesla reported in its Q3 that operating costs are at the below level since its Shanghai-based factory is fit for production ahead of schedule and since Model 3 production started. CEO Elon Musk said he was “super proud” of the Tesla team. 

    The current consensus among 33 surveyed investment analysts, according to CNN Money com. is to hold stock in Tesla. 

    Several Wall Street analysts boosted their price target on Tesla after it reported an unanticipated third-quarter profit and more economical operating expenses.

    If Traders-Paradise has good data, Tesla’s stock price could reach somewhere between $315 and $365 to the end of this year with a tendency to reach $2,500 in the next five years. Tesla stock is attempting to recover the 300 price level but the buy point isn’t clearly visible.

     

  • Tesla’s Claims Fall Short – Again

    Tesla’s Claims Fall Short – Again

    2 min read

    Tesla drops lawsuit against critic

    When ordered to produce evidence of alleged danger presented by a short-seller, Tesla withdraws its request for a court-ordered restraining order. Tesla’s claims fall short once again.

    Earlier this year Tesla has filed a request for a restraining order against a member of short-seller community TSLAQ known as “skabooshka”, real name Randeep Hothi, to the Alameda County Superior Court in Alameda County, California. In filing Tesla has claimed that Mr. Hothi has injured a security guard at Giga Factory in a hit-and-run incident, and also nearly caused a traffic accident while pursuing a test model of Model 3 during a test run on April 16. Upon being granted a temporary injunction by the court, Tesla was requested to provide audio and video recordings of those two incidents as evidence.

    Surprising turn-over

    But, in a surprise move the car producer has withdrawn request for the restraining order on July 19.

    In the letter to the court, Tesla’s lawyers have expressed the opinion that the request of the audio and video recordings of the incidents are an undue imposition on the privacy of their employees, stating that such materials contain personal and private conversations. They have expressed a belief that “restraining order against Mr. Hothi is necessary and appropriate to protect its employees at their workplace.” Further claiming that the company was forced to choose between employees’ safety and exposing their personal conversation to the public. Thus, the document states, the company has decided to pursue the safety of its employees “by other means”.

    And what those other means could be should make people worried, as the history of Tesla’s retaliation against its critics illustrates.

    Tesla’s claims fall short

    Shortly after the Reveal from The Center for Investigative Reporting has published a piece alleging that Tesla is under-reporting the work-related injuries, one of the CIR’s insiders have alleged retaliation. Said doctor alleged that a complaint to the relevant Medical Board was lodged against her, while also an anonymous call was placed to state’s Child Protection Service accusing her of negligence to her children and requesting that her kids be placed under the protective care of the state.

    But such false accusations look to be the modus operandi of Tesla when handling the critique.

    Tesla model 3

    Last year Ars Technica has published a story about the alleged attempt of a mass shooting at Giga Factory by a whistleblower Martin Tripp. At that time the Tesla representative has told Ars that they have received an anonymous call at Giga Factory by a male caller claiming that Mr. Tripp is “extremely volatile” and “heavily armed”. But according to the information provided to Mr. Tripp’s attorney and then to Ars the alleged call was made to Tesla’s call center in Las Vegas and then forwarded to Giga Factory’s head of security, Sean Gourthro. Gourthro then has texted to Story County Chief Deputy Tony Dosen that an anonymous female caller has alerted them that Mr. Tripp is en route to “shoot up Tesla”, per Story County Sheriff’s Office report. According to an in-depth investigation by Bloomberg, when police officers have tracked down Mr. Tripp they have discovered that he presents no danger for Tesla’s employees. 

    “He said he was terrified of Musk and suggested the billionaire might have called in the tip himself. A sheriff’s deputy attempted to cheer up Tripp and then called Tesla to tell the company that the threat, whoever had made it, was bogus.”

    Bottom line

    Since we wrote so many times that any news may have an influence on the stock price of some company, it will be interesting to make a comparison in stock price before and after incidents like this one. Do investors take care of how companies treat their employees? Is the company’s public outlook important for them? We will see. Today Tesla’s stock looks like this:

    Tesla stock target price: $890.00

    Current price: $255.68

    Stay tuned and follow the market

  • Tesla shares drop but it could a 50% grow within a month

    Tesla shares drop but it could a 50% grow within a month

    3 min read

    Tesla shares were higher 2%, floating around the $200 mark on Thursday.

    The day before, Tesla CEO Elon Musk had sent an email to employees, saying that Tesla could gain a new delivery record and had above 50,000 net new orders for the next quarter.

    “Based on current trends, we have a good chance of exceeding the record 90,700 deliveries of Q4 last year and making this the highest deliveries/sales quarter in Tesla history!” Musk wrote in the mentioned email.

    Tesla last report for the first-quarter was disappointing for Wall Street.

    The company missed Wall Street expectations.

    And the worries about Tesla short term arose immediately.

    Tesla last month announced first-quarter deliveries missed Wall Street expectations. The worries about the company’s short term bloomed.

    The consequence was, some Wall Street experts have decreased their expectations for the company.

    They expressed their concern, frequently focusing on sale worries and liquidity. The negative criticism arose.

    Tesla shares have dropped 30% in the past 12 months and 42% this year.

    The big turn over of Tesla’s shares

    Shares of the electric-car maker drop at $190. It is for the first time in two years.

    Tesla shares grew but it could a 50% drop within a monthImage source: Yahoo Finance

    The company got thrashed by a range of negative analyst predictions.

    Also, Elon Musk warned the stuff the “hardcore” cost cuts are necessary because the company would be out of cash in 10 months if not doing so.

    For analysts, the bad sign was recently price cut on its cars. The demand is lower and there are so many reasons for experts concerns.

    But still, some of the analysts claim that Wall Street is “misunderstanding the Tesla story”.

    Musk’s successes are internationally recognized. Also, it isn’t a secret that he put himself and Tesla into trouble. All because of a tweet on August where Musk claimed there is a possibility to the company to be taken private with “funding secured”. That caused problems with the government.

    According to Yahoo Finance, an analyst for a firm “with a major investment in Tesla said Friday that recent drastic price-target cuts on the stock by others on Wall Street are missing the big picture.”

    That firm is Ark Invest. Last year its founder forecasted on CNBC that Tesla could score $4,000 per share. They still stand by that call, even now when Tesla’s stock lost almost 40% of its value.

    To buy or to sell Tesla shares?

    Tasha Keeney, Ark analyst, stated Ark hold so firmly in Tesla that its five-year, bear-case scenario is $560 per share.

    That would be almost triple the value of the price where the stock closed, at $195.

    Also, the fact is the company raised $2.7 billion. The first quarter was finished with $2.2 billion in cash.

    So, bankruptcy appears very doubtful. Almost impossible. The opinion that Tesla will easily run out of money in the next period and close its complete business looks a bit absurd.

    The company could raise more capital as Musk already showed they are able to do so.

    Also, they could change its business model and sell battery packs to some other carmakers. Or something else, Elon Musk is able to do very unexpectable things to maintain Tesla and exits as a winner.

    Tesla could also sell more stock and convertible debt. The last has a lower interest rate than regular loans. Tesla recently raised a convertible debt with an interest rate of 2%. So, who says they cannot do it again?

    Tesla is a global leader in two businesses: cars and renewable energy.

    Tesla has a really great opportunity in the sector of electric cars. Especially in China, for example.  

    Its stock could easily produce a return of more than 100% in the future.

    Okay, there was some disturbing situation with their autopilot when one man was killed in a traffic accident while using autopilot. He simply and sadly hit the truck. But the company announced that their new cars have the hardware for full self-driving abilities and the software is ready.

    Tesla can meet its near-term production goals, that is for sure. It can manage the cash crisis. So it is more realistic to expect it will have a good future. This brand is not going to easily disappear.

    Yes, its CEO Elon Musk can be questionable but at the same time, no one can say he isn’t a very capable man. Controversial but capable.

    So, Tesla stock can be attractive for risk-tolerant investors.

    risk disclosure

Traders-Paradise