Market Overview

Tesla Short Sellers Take $1.4B Earnings Hit

Share:
Tesla Short Sellers Take $1.4B Earnings Hit

It’s been a rough year for Tesla, Inc. (NASDAQ: TSLA) investors, with the stock down more than 10% year to date overall even after a huge 16% gain on Thursday following a third-quarter earnings beat. While Tesla bulls celebrate the long-awaited good news, Tesla short sellers are getting torched.

Massive Profits Wiped Out

Heading into earnings, Tesla was the most profitable short trade of 2019 by a wide margin, scoring short sellers a $2.03 billion year-to-date mark-to-market profit. However, Tesla short sellers endured $1.4 billion in losses in early Thursday trading, according to S3 Partners analyst Ihor Dusaniwsky. He said Tesla short sellers saw 70% of their 2019 profits evaporate in a matter of minutes.

This year had been a rebound year for Tesla short sellers after they booked mark-to-market losses of $1.40 billion in 2018, $3.56 billion in 2017 and $400 million in 2016, according to Dusaniwsky.

Tesla is the second most heavily shorted U.S. equity with $8.31 billion in short interest. Only Apple, Inc. (NASDAQ: AAPL) has more short interest than Tesla at $10.47 billion in shares held short.

Fortunately for Tesla shorts, many of them locked in their profits prior to Thursday, with 5.12 million short shares covered since June. In the past week, S3 reported 1.5 million Tesla short shares have been covered ahead of earnings. Short interest now represents 23.1% of Tesla’s public float.

See Also: 'Game Changing': Wall Street Weighs In On Tesla's Q3 Earnings

Short Squeeze Coming?

While Tesla shorts are feeling the pain, Dusaniwsky said a sustained push in the $300s for Tesla could trigger additional short covering.

“If TSLA’s stock price continues to climb we expect continued short covering to give the stock a short squeeze tailwind. If TSLA’s stock price surge pushes the stock steadily into the $300 range we should see shares shorted fall below the 30 million share level. That would be over 2.6 million shares of buying from the short side helping push TSLA’s stock price further into short squeeze territory,” Dusaniwsky said.

Following Thursday's gain, Tesla shares are now back above water for the past year, up 1.5% overall.

Benzinga’s Take

While the earnings report got Tesla back to where it was 12 months ago, a sustained push above $300 and a potential short squeeze may require at least one more impressive earnings report. Financial inconsistency has been one of the most common criticisms of Tesla in recent years, and it may take more than one earnings report to convert the skeptics.

Tesla's stock traded around $297.64 per share at time of publication.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

Latest Ratings for TSLA

DateFirmActionFromTo
Feb 2020JefferiesDowngradesBuyHold
Feb 2020Cowen & Co.MaintainsUnderperform
Feb 2020Morgan StanleyMaintainsUnderweight

View More Analyst Ratings for TSLA
View the Latest Analyst Ratings

Posted-In: Ihor Dusaniwsky S3 PartnersAnalyst Color Short Sellers Analyst Ratings Trading Ideas Best of Benzinga

 

Related Articles (TSLA)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
MCFRAMaintains15.0
SHAKCFRADowngrades60.0
HDCFRAMaintains255.0
SOLOAegis CapitalMaintains4.0
TBPHHC Wainwright & Co.Maintains32.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com