About us

About us

Based out of Auckland, New Zealand, we bring an institutional trading experience to the retail market.
Mark O' Donnell
 · 
Research Analyst
July 19, 2021
 · 

When Is The Right Time To Short Tesla?

Tesla Inc (NASDAQ: TSLA) appears to have tremendous short potential still. It might pay to wait for the Company's stock to fall below $560 per share, though. On at least two occasions in 2021, buyers have been waiting at this price point to scoop up shares, significantly countering any downwards momentum. Thus, waiting for a decent break below $560 might be prudent before betting against the EV manufacturer. For the more cautious, waiting until $500 is another entry point worth considering.

YTD, Tesla shares have fallen 11.7%. For the stock to reach $560 or $500, the stock would have to fall another 13.1% and 22.4%, respectively.

TSLA

The share price has been traversing down a flattening wedge since the beginning of the year. Of course, This technical perspective is no perfect predictor of where the price is heading. Still, from a fundamental perspective, recent Tesla's PR isn't exactly helpful to for Tesla Bulls.

Can bad PR help Tesla shorts?

The issues that have recently affected Tesla include:

-  The Company's CEO, Elon Musk, said last week that he doesn't enjoy his role at the Company. Further, he believes the Company would fail if he were to step back from leading the Company, intimating that the Company's success hinges too much on his involvement

-  The above piece of hot gossip was revealed during Musk's court testimony in which he is defending Tesla's allegedly poor decision to purchase the cash-strapped SolarCity in 2016. The lawsuit's plaintiff is asking Tesla repay shareholders the $2.6B cost spent on acquiring the SolarCity.

-  Tesla has had to "recall" almost 300K vehicles in China due to safety concerns regarding its Autopilot feature. Admittedly, the recall is considered a soft recall and only involved a software update. Nevertheless, Tesla's Autopilot credentials have taken another hit. Early in July, Musk admitted that the Company has struggled to overcome the many challenges included in implementing a safe self-driving vehicle. Personally, the idea of self-driving cars always seemed a little far-fetched to me, so I never understood how the Company's was able to leverage the hype of this technology.

 

What does Michael Burry Think?

In May, Michael Burry, via his investment company, Scion Asset Management, revealed a half-a-billion short position against Tesla.

One reason that Burry is so Bearish on Tesla is that he sees a significant portion as unsustainable. Currently, Tesla pads its balance sheet by selling carbon credits to other automakers. In April, Tesla reported $518 million from the sale of carbon, equivalent to 20% of the Company's revenue for the period. Naturally, Burry sees this form of revenue drying up soon, as Tesla's competitors push into EV production themselves and require fewer credits from the EV leader.

Curiously, Tesla shares have risen 11.6% since Burry’s revelation.

Trade with an award-winning broker
Start trading in less than 5 minutes