Tesla Short Sellers Lost A Whopping $4.2 Billion Following Q3 Earnings

November 3, 2024

Tesla short sellers lost a whopping $4.1 billion following Q3 earnings after the company reported higher-than-expected profits, according to fresh data from S3 Partners.

Tesla’s (TSLA) stock rally following its earnings report has resulted in significant losses for short sellers, totaling $4.2 billion in just two days after the company’s third-quarter earnings announcement in October, according to S3 Partners.

On October 23, Tesla reported a profit that exceeded expectations and improved profit margins, leading to the stock’s largest single-day increase in a decade.

The shares surged 22% that day—the best performance since 2013—and gained an additional 3.3% later that Friday.

Although the stock rose about 1% on Monday, it reversed course and closed down 2.5% that day.

This isn’t the first time this year that short sellers have suffered substantial losses betting against the company led by Elon Musk.

Following Tesla’s better-than-expected first-quarter earnings in April, short sellers lost over $5 billion.

Tesla’s stock has shown volatility in recent weeks, initially dropping in early October after the automaker missed Wall Street’s delivery estimates, issued a recall, and discontinued a lower-priced model.

The stock then rallied in anticipation of the robotaxi unveiling, only to decline sharply when the event did not meet expectations.

Tesla’s latest rally occurred despite mixed results in its third-quarter report.

While the company surpassed Wall Street’s forecasts for adjusted earnings per share and gross margin, its revenue of $25.18 billion fell short of the expected $25.4 billion, according to Bloomberg consensus estimates.

Several Wall Street analysts, including those from Morgan Stanley, Bank of America, Deutsche Bank, Wedbush, Canaccord Genuity, and William Blair, have maintained their Buy ratings on Tesla’s stock following the earnings report. Bank of America raised its price target for Tesla from $255 to $265.

John Murphy, the firm’s senior auto analyst, mentioned on Yahoo Finance’s Opening Bid podcast that he is considering another price target increase for Tesla.

While some investors have been wary of the company’s focus on AI, Morgan Stanley analyst Adam Jonas expressed optimism after Tesla’s third-quarter earnings call emphasized growth in its automotive sector, which represents 80% of the company’s revenue.

Jonas highlighted CEO Elon Musk’s goal of achieving 20% to 30% growth in electric vehicle deliveries by 2025 while working to reduce production costs.

“As investors navigate the transition from auto to AI, this report underscores that growing the auto business profitably remains a top priority,” Jonas noted in a message to investors.

Currently, 20 out of 60 analysts covering Tesla, as tracked by Bloomberg, have a Hold rating on the stock, and 15 analysts recommend selling. On average, they project shares could drop to $228 over the next year, according to Bloomberg consensus estimates.

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