Tesla Is By Far The Most Profitable Short Trade Of 2019
This year has been another disappointment for Tesla Inc (NASDAQ:TSLA) investors, with the stock down 23.7% year to date. However, Tesla’s struggles have made it the most profitable stock of the year for short sellers, and it’s not even close.
Tesla short sellers have netted a $2.03 billion year-to-date mark-to-market profit, according to S3 Partners. Not only does that big gain make Tesla the most profitable U.S. short of the year, Tesla short sellers’s gains dwarf all other stocks.
Tesla’s closest competition is DuPont de Nemours Inc (NYSE:DD). But Tesla short seller’s $2.03 billion profit is more than three times the $657.5 million gain DuPont short sellers have enjoyed.
Tesla short sellers have been taking some profits off the table heading into Wednesday's third-quarter earnings release.
“TSLA’s +5% October price move and nearly three million of short shares covered looks like more recent short sellers are closing up their positions to realize what is left of their 2019 profits, S3 analyst Ihor Dusaniwsky wrote in a report this week.
Tesla shares are now up more than 40% from their 52-week lows, and Dusaniwsky says short sellers have been feeling the heat in recent months. However, the gradual rise in Tesla’s share price and the plentiful supply of shares to borrow hasn’t triggered a classic short squeeze at this point.
Tesla’s total outstanding short position is down 26% in the past five months, but it's still the second-largest short position of any U.S. stock. Tesla has an $8.39 billion outstanding short position, roughly 23.4% of the stock’s float.
Tesla is certainly primed for a potential short squeeze if the company can consistently beat market expectations in the next several quarters. However, Tesla bulls have been waiting for this short squeeze for years, and it hasn’t come.
Tesla’s inconsistent financial performance and inability to hit its production and delivery targets are the primary reasons the stock is up less than 10% overall in the past five years, generating less than 20% of the long-term return of the overall S&P 500.
Tesla's stock traded around $254.28 per share at time of publication.
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