Tesla Stock Short-Sellers Lose Billions Yet Again Amid Splendid Rally

Tesla stock (NYSE: TSLA) has more than doubled this year and has closed with gains for 11 consecutive sessions leading to massive losses for those who were short on the Elon Musk-run company.

According to data from S3 Partners, amid the recent rally in Tesla stock, short sellers have lost a whopping $6.08 billion. TSLA stock has gained 35% since May 24 amid a broad-based rally in tech stocks.

Tesla stock short-sellers lose billions amid the rally

S3’s head of predictive analytics Ihor Dusaniwsky said that $22.43 billion worth of TSLA shares have been short sold. Notably, TSLA is often the most shorted company on US stock markets – as is the case currently.

While there is a vast army of Musk fans and Tesla bulls, many others see the stock as overvalued. Notably, in 2021, Tesla’s market cap surpassed $1 trillion – a milestone that no other automaker has ever remotely come even closer to.

For instance, Toyota Motors, which sells over 10 million cars annually and is the world’s largest automaker, has a market cap of $241 billion which is less than a third of Tesla’s.

TSLA is a polarizing stock

TSLA is probably the most polarizing stock on Wall Street. On the one hand, we have bulls like Cathie Wood who incidentally expects the stock to rise to $2,000 by 2026 under her base case scenario.

Ron Baron, another Tesla bull, expects TSLA stock to reach $1,500 by the end of this decade.

On the other end are bears like JPMorgan which has a lowly $115 target price on the stock. Even Ashwath Damodaran – popularly known as the “dean of valuation” believes that Tesla stock is way too overvalued.

Musk believes TSLA can be the world’s biggest company

During Tesla’s Q4 2022 earnings call, Musk said that he is “convinced” that Tesla would one day become the most valuable company globally. During the Q3 2022 earnings call, Musk predicted that Tesla’s market cap would one day surpass the combined market caps of Apple and Saudi Aramco.

During the Q1 2023 earnings call, Musk talked up the company’s software capabilities and said, “we’re the only ones making cars that, technically, we could sell for 0 profit for now and then yield actually tremendous economics in the future through autonomy. No one else can do that. I’m not sure how many people will appreciate the profundity of what I’ve just said, but it is extremely significant.”

The company currently charges $15,000 for its FSD (full self-driving) subscription and Musk believes the price would eventually rise to as high as $100,000. Notably, Tesla raised the FSD price by $5,000 in 2022 also.

Musk has said that TSLA is open to sharing its self-driving tech with other automakers.

What’s driving the recent rise in Tesla stock?

Over the last couple of weeks, Tesla has partnered with Ford and General Motors to share 12,000 of its Superchargers. Also, both Ford and General Motors have agreed to make their future EVs compatible with Tesla’s chargers.

The deal looks like a win-win for all the companies. While Ford and General Motors would get access to Tesla’s charging network and would need to spend less on their own charging network, Tesla would realize revenues whenever Ford or General Motors cars charge at one of its Superchargers.

That said, the deal is negative for pure-play EV charging companies.

Tesla is launching new models

Musk teased two new Tesla models at the annual meeting last month. While Musk did not provide many details about the two models, he has previously said that the company is working on a new vehicle platform that would cost half as much as the Model 3 – which is currently the cheapest car in Tesla’s portfolio.

After multiple price cuts, the Model 3 now starts at just under $40,000 in the US which is the cheapest it has been since the launch.

Also, Tesla recently announced that all the Model 3 variants are now eligible for the $7,500 EV tax credit would bring down the model’s cost to as low as $30,000 in some states.

Tesla wants to produce 20 million cars by 2030

Tesla has set a 2023 production guidance of 1.8 million which Musk said can rise to 2 million in the best case.

TSLA has set itself a target of producing 20 million cars annually by 2030. To put that in perspective, Toyota, the world’s largest automaker, sold just over 10 million cars in 2022.

To achieve the goal of 20 million deliveries, which amounts to a CAGR of over 41% between 2023 and 2030, Tesla might need to build many more Gigafactories. In the past, Musk said that the company would need over a dozen Gigafactories to reach that goal.

At the annual day, Musk said that the company can sell 5 million units annually of the two new models. Additionally, he said that it can deliver upto half a million Cybertrucks.

All said, Tesla stock short sellers might not be a happy lot. Short sellers lost billions betting against Tesla in 2020 and 2021 as the stock soared 740% and 50% respectively. Cumulatively, short sellers lost $60 billion in these two years shorting TSLA stock.

Short sellers did make $15.85 billion in paper profits last year as Tesla stock fell 65% and had its worst year ever.

However, 2023 is turning out to be yet another nightmarish year for Tesla stock short sellers amid the splendid rally.