Tesla stock gained in premarket trading.
Tesla has tumbled more than 37% in December alone, extending its decline to about 65% this year and wiping out over $670 billion in market value. This marks a radical about-face for a stock that was one of the great winners of the pandemic, having surged more than 740% in 2020 on the back of booming demand and rock-bottom interest rates.
This year’s 89% return is a rare victory for the shorts, who had once amassed a huge bet against Tesla and its lofty valuation. At one point in 2018, more than one third of the stock’s entire free float was held short. High-profile financiers such as Jim Chanos, David Einhorn and Andrew Left were among those who had piled in.
This infuriated Musk. He vowed to“burn”the shorts and even sold merchandise — a pair oflimited editionsatin shorts for“Only $69.420”— to mock them as Tesla prices soared. As the Tesla rally quickened, most short sellers re-examined their bets. Today, only about 2.9% of Tesla’s free float is currently held short, according to S3 data.
Late on Wednesday, Morgan Stanley analyst Adam Jonas, who has had the equivalent of a buy rating on the stock since November 2020, said there is an “attractive entry for investors” amid the steep slide in the share price. Jonas cut his price target on Tesla to reflect lower pricing and reduced valuation of the company’s businesses, but said he expected the company to extend its lead over the EV competition in 2023.
But even if share price begins to recover from here, Tesla’s notorious volatility could continue to linger, according to S3’s Dusaniwsky.
“When Tesla’s stock begins to tick upwards, there should be a flurry of short covering which will help boost its stock price higher and quicker as shorter-term short sellers look to realize their outsized mark-to-market profits before they evaporate,” he said.
Comments