Tesla’s stock, like many other growth and tech-heavy stocks, had a rough opening to this year. Pressured by supply chain issues and lockdowns in China, TSLA shares are down just over 30% YTD.
And many Tesla bears, trying to take advantage of the company’s fragile economic situation, increased their short positions throughout the first half of the year.
However, positive Q2 results have helped shares climb to the $800 level after they hit a late-May nadir near $630. As a result, short sellers who recently piled on to their short positions are having a rough go of it.
An Unprofitable July For Tesla's Bears
According to a recent report from S3 Partners research, investors who bet against Tesla in July have already experienced about $2.67 billion in mark-to-market losses. That equates to a roughly -14% monthly return, based on a short interest valued at $18.8 billion.
Since the beginning of July, Tesla shares have risen more than 20%, and investor confidence has been bolstered following the company's second-quarter earnings, which beat Wall Street estimates, even as the company faced significant supply chain difficulties.
These upside moves have put short sellers on the retreat over the past few weeks. The S3 Partners report also shows that, in the past seven days alone, about 1.2 million shares - worth a staggering $891 million - were bought to cover short positions.
Zooming out, however, the year-to-date performance of Tesla short sellers is still solid. They are up about 30% this year, making about $6.34 billion in mark-to-market profits so far.
Although these may seem like huge gross short volumes, they’re paltry compared to Tesla’s overall market cap. Indeed, only about 2.9% of TSLA float is shorted. This is an indication that the overwhelming majority of investors and traders focusing on Tesla are bullish on the company.
Wall Street Mostly Bullish After Q2 Earnings
On July 20th, for their Q2 earnings, Tesla crushed expectations on EPS. The company generated earnings-per-share of $2.27 (adjusted) vs $1.81 expected. Revenues, meanwhile, came in just below market estimates, at $16.93 billion, vs. $17.1 billion expected. Even with a drop in automotive margins compared to the same period last year, the results were well received by investors, who bought up shares and sent TSLA up 13% over the next several days.
The result excited Wedbush analyst Dan Ives, a Tesla bull who has a $1,000 price target on the company. Ives saw important headlines in Tesla’s robust June run rate and their decision to stick with their 50% growth YoY delivery unit guidance for 2022.
On the bear side, Bernstein analyst Toni Sacconaghi, still has a $450 per share target price on Tesla. He considers the EV manufacturer’s valuation to be stretched, and he saw Tesla's Q2 results in line with reduced expectations. The analyst sees TSLA’s 50% annual growth target as overly-ambitious, especially given volumes coming out of Tesla’s Berlin and Austin plants.
Tesla "Haters" Have A Fund To Short The Stock Now
Tesla bears - as well as Bernstein analyst Toni Sacconaghi - can now bet against Tesla via a single-stock ETF. Launched by AXS Investments, the AXS TSLA Bear Daily ETF (TSLQ) uses derivatives to bet against Tesla. Investors should note, though, that the fund contains aggressive tools and that can expose holders to significant losses.
The ASX fund is intended for sophisticated investors or traders who have a deep knowledge of the risks involved in leveraged investing and have the habit of monitoring their portfolios regularly.
Since it began trading on July 14, the AXS TSLA Bear Daily ETF has fallen 13%.