Why Tesla is such a battleground stock
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Currently, about 27% of Tesla’s public float — the shares available to trade on the open market — are short the stock, according to mid-April market data. Short bets can run above 60% of available shares, but Tesla isn’t a micro-cap stock like many of those companies. Even after a year-to-date decline of roughly 20%, Tesla is still a near-$50 billion company, bigger than Ford and not far beneath GM. Even after several recent rounds of layoffs, it employs roughly 40,000 people.
“Most investors or analysts that cover autos, they almost have cororaries when they look at the valuation. Investors who are bullish are disruptive technology investors,” Ives said. “The risks have increased over the past six months, and now we view it as a fork-in-the-road stock.”
Investors who are enamored of the Tesla mission and are willing to overlook Musk’s recent feuds need to remember that cash flow, profitability, manufacturing execution and market demand are the make-or-break issues for the company and its shareholders.
Tesla is expected to report a loss when it releases its first-quarter earnings on Wednesday after the bell, with deliveries of cars declining and its cash a continuing concern. Tesla had $3.7 billion at the end of 2018 but had to recently pay back close to $1 billion to holders of its debt.
“Right now the bears are having a field day,” Ives said “This is not a stock that will be sitting at $260 at the end of the year. It will either be meaningfully higher or lower.” He has a $390 price target on Tesla.
Ives said the most bears have shifted from conspiracy theories — with drones flying over the gigafactory and Fremont, California, car plant, looking for signs the company won’t even exist — to a focus on production and demand numbers that at times Tesla has been able to hit, which surprised even bears.
“This is the early stages of a massive market opportunity, and many investors are viewing the competition looming and think Tesla’s best days are in the rear view,” Ives said. “We disagree, but that makes it a prove-me story.”
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