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Tesla Bears versus Bulls: Bears Are Winning This Year

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In Tesla’s (TSLA) ongoing battle with short-sellers, the latter seem to be winning this year thanks to stock’s year-to-date decline of 30%. One prominent Tesla short-seller is Greenlight Capital’s (GLRE) David Einhorn. Last year, Einhorn and Elon Musk clashed over Greenlight’s short position in the company.

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Einhorn betting against TSLA

Einhorn weighed down on Tesla at the Sohn Investment Conference 2019. Tesla is the only major short position going Einhorn’s way this year. During his Q1 investor letter, he stated that in addition to facing vehicle safety concerns, Tesla is in a difficult position as far as its operating performance is concerned. He added that the total annual demand for Tesla’s Model 3 was about 200,000 vehicles in Q1, compared with Musk’s estimate of 500,000–700,000 units.

Other hedge fund managers versus Tesla and Musk

Former hedge fund manager Whitney Tilson is also a major Tesla short. He forecast back in May that Tesla would never report another profitable quarter.

Mark Spiegel, another hedge fund manager, is also known for his bearishness on the electric car maker. As reported by Yahoo Finance, he said, “Demand for its existing models is only being maintained via continual price reductions, and it will have to raise billions of dollars to produce new models in a market soon to be saturated with enormous competition.”

Another hedge fund manager, Jim Chanos, has been a very vocal Tesla short and has criticized Musk publicly. He was betting that the company would go bankrupt. But according to his June SEC filing, he has invested $420,000 in long call options on Tesla stock.

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Analysts deeply divided on Tesla stock

Of the 32 analysts covering TSLA stock, 31% recommend “buy,” and 41% recommend “sell.” Their average target price is $248.50. However, their targets vary widely, from $140 to $400.

Needham & Company bearish

On Tesla, Needham & Company analyst Rajvindra Gill has said, “We are in the bear camp.” He believes that to meet its targeted deliveries of 360,000–400,000 this year, Tesla will have to cut prices and follow aggressive lease plans. This move could mean boosting revenue at the expense of margins. It’s not easy for companies to generate profits selling electric cars. Even mainstream auto giants Ford, General Motors, and Fiat Chrysler (FCAU) have failed to do so. In 2014, Fiat Chrysler’s CEO asked customers not to buy its electric cars since the company lost money on each one.

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Evercore ISI analyst Arndt Ellinghorst downgraded Tesla stock to “underperform” on April 22. He cited concerns about declining demand as the major reason for the downgrade. On June 20, Goldman Sachs analyst David Tamberrino cut his target on Tesla stock by 21% “on concerns about the sustainability of demand for the electric car maker’s models,” according to Reuters.

After Tesla’s disappointing second-quarter results, CFRA downgraded it to “sell.” Morgan Stanley lowered its target price while maintaining an “equal-weight” rating.

JMP Securities is positive on TSLA

JMP Securities analyst Joseph Osha, on the other hand, is a strong Tesla supporter. Ahead of the company’s second-quarter earnings, he expressed confidence in the stock, saying he expects the company to end 2019 with $3.5 billion in cash and cash equivalents. He has assigned the stock an “outperform” rating.

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