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Big Tesla Bull Turns Short-Term Bear


Oct. 22 2019, Updated 10:29 a.m. ET

Tesla (TSLA) stock has long been an institutional investor favorite. However, in a surprising move, ARK Investment Management, a bullish Tesla investor, has sold massive quantities of Tesla stock this month, according to a Business Insider report.

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ARK sells Tesla stock

Since October 1, as per the report, ARK has sold around 154,000 shares of TSLA, which amounts to almost $39 million, as per the latest closing price. The stock sale has come right ahead of the company’s third-quarter earnings release, which is scheduled for October 23.

Reportedly, ARK sold this massive chunk of shares to benefit from the trading opportunity pre-earnings. Tesla stock remains one of ARK’s top picks.

Renato Leggi, a client portfolio manager at ARK, said, “We’re long term investors, but we are short term contrarian. We trade quite often – in some cases almost every day – and we trade around positions. We’re not market timers but we will take advantage of volatility.”

Institutional investors bullish

Besides ARK, other institutional investors are also bullish on Tesla stock. Baron Capital has been supporting the company for quite some time now. Baron believes that Tesla’s China ramp-up and the company’s fast-progressing technology in electric cars to be the growth drivers for the company.

Tesla is at the brink of starting production at its Gigafactory 3 in China. CEO Elon Musk believes that a local manufacturing footprint could give Tesla a competitive advantage. Tesla’s focus on making low-cost batteries is also one of the reasons Baron has confidence in its stock.

Last year, Baron projected that Tesla’s revenue could reach $1 trillion by 2030. In 2018, Ron Barron, CEO, CIO, and portfolio manager at Baron Funds, said, “I think this is going to be the biggest car company. I think they’re going to have 10 million cars, 15 million cars sold per year eventually.”

Baron held 1.6 million Tesla shares at the end of the second quarter. At the same time, the top institutional investors in Tesla were Baillie Gifford, Capital World Investors, Public Investment Fund, and Vanguard Group.

Like Barron, Joule Financial’s CIO Quint Tatro has a positive opinion on Tesla stock—but he believes in Tesla due to Musk, not its fundamentals.

Tatro said in a CNBC report, “If you want to own a company like this, you believe in [CEO] Elon Musk, as I do — and I’ve owned it in the past — you’re owning the belief in the entrepreneur, the optimism surrounding the technology, but you cannot own this stock on a fundamental reason at all.”

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Tesla stock performance

This month, Tesla stock has risen by about 5.2%. This rise could be in anticipation of the company’s third-quarter earnings results.

Wall Street analysts expect Tesla to post a small loss in the quarter. However, Musk expects the company to break even in the quarter and post a profit in the fourth quarter. It’s this expectation that’s building positive sentiments in the stock.

Tesla had record deliveries in the third quarter, but it fell short of analysts’ estimate. Last year, the company posted profits in two out of four quarters. To learn more, read Tesla Earnings Week: Can It Repeat Last Year’s Magic?

Peer comparison

Tesla stock has outperformed its peers, who have posted mixed performances. While Ford Motor Company (F) and General Motors (GM) stocks have fallen 1.4% and 4.1%, respectively, month-to-date, Ferrari (RACE) and Fiat Chrysler Automobiles (FCAU) have risen 1.3% and 2.9%, respectively.

In the third quarter, Wall Street analysts expect Ford’s and GM’s earnings to fall 10% and 30%, respectively, YoY. Also, they expect Fiat’s earnings to fall 5% YoY. However, they expect Ferrari’s earnings to rise 12% YoY in the third quarter. Automakers’ earnings releases will start this week.

To learn more about these companies’ long-term earnings outlooks, read Automakers’ Growth Outlook: F, TSLA, GM, FCAU, and RACE.


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