Tesla – Price bubble through Short Squeeze?

Cybertruck - with the usability of a truck and the performance of a sports car
Cybertruck – usability of a truck and the performance of a sports car, © Tesla

Tesla’s share price rose sharply from US$ 230 to over US$ 360 during the reporting period, after the third quarter did not close with a loss (consensus was a loss of US$ 1.31 per share), but on the contrary with a profit of US$ 143 million (US$ 0.78 per share GAAP). Cash holdings were also maintained at US$ 5.3 billion.

Tesla claims to have greatly reduced unit costs and to be producing more efficiently. However, many analysts are wondering whether this result is not due to some accounting changes. This is because investments (capex) for the year as a whole are likely to be around US$ 1.5 billion, whereas the company itself had once forecast US$ 2.5 billion.

Investments in China (Gigafactory in Shanghai) as well as various new product launches (Model Y, Semi, Roadster) also require significantly higher expenditure. If one looks at stock-based compensation, which amounted to more than US$ 822 million in the third quarter, a derivation could be made from this as well, as the reduction in warranties raises questions. A good US$ 50 million could be derived from this for the result for the third quarter.

A look at the sales figures is interesting: In the USA, these fell by a substantial 39 percent in the third quarter. China should balance this out. At the same time, more and more e-cars are being sold via leasing and no longer directly. This also has an impact on the valuation of these vehicles and liquidity.

In short: In my opinion, the supposedly better-than-expected figures were mainly used to trigger a short squeeze, i.e. institutional investors and hedge funds should take the quarterly figures as an opportunity to buy massively in order to put pressure on the short sellers (who are betting on falling prices). After all, approximately 22 percent of the outstanding shares or over 34 million shares have been sold short, so that the squeeze can be a logical consequence of this.

read more in H2-international February 2020

Risk warning

Every investor must always be aware of his own risk assessment when investing in shares and also consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid-caps, i.e. they are not standard stocks and their volatility is also much higher. This report is not a buy recommendation – without commitment. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on a medium- and long-term valuation and not on a short-term profit. The author may be in possession of the shares presented here.

Author: Sven Jösting, written beginning of December 2019

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