We won’t deny being part of the “short Tesla” crowd over the years.

And we won’t deny a part of that was due to missing out when it was around $20 per share back in 2013… before it split its stock.

[We’re too much of a coward to figure out what the entry price would be in today’s “Tesla dollars.”]

But while we’ve encouraged you to take profits off the table here and there – and even bet on the market falling the rest of this year – there’s one stock we’d recommend staying away from on the short side unless you really know your game…

And that’s Tesla. We’ll take you through our reasoning below…

Not Worth the Risk

Check out the Tesla chart. From 2010 to today the stock is up over 11,200%:

Source: Yahoo! Finance

At the stock’s peak back in 2021, it was up more than 24,000% from 2010 on this scale.

That’s been a tremendous win for those who owned the stock… and it was a tremendous disaster for those who tried to short-sell the stock.

And believe your editor, many tried… including many big Wall Street hedge fund managers.

But since that 2021 peak for Tesla, it hasn’t been good news. Look at the chart. The stock price has halved, and even the biggest Tesla “fanboy” would have to agree the chart is in (or appears to be in) a definite downtrend.

Which is why our bet is the Tesla short trade is likely to make a new appearance around the value investing and short-selling world…

At exactly the same time when the Tesla fanboys are feeling they’ve just about weathered the worst of the storm.

We say all this based on Tesla’s recent earnings, and how the market reacted. Here’s a shorter-term chart showing the price move:

Source: Yahoo! Finance

The black ellipse to the right shows the bar for the closing price before earnings, followed by the bar for the price after earnings.

The stock closed up $18, or more than 12% on the earnings news. And what did the earnings news tell us?

Let’s look back. It told us this, as reported by CNBC:

Tesla reported a 9% drop in first-quarter revenue on Tuesday, the biggest decline since 2012, and missed analysts’ estimates, as the electric vehicle company weathers the effect of ongoing price cuts.


Revenue declined from $23.33 billion a year earlier and from $25.17 billion in the fourth quarter. Net income dropped 55% to $1.13 billion, or 34 cents a share, from $2.51 billion, or 73 cents a share, a year ago.

The drop in sales was even steeper than the company’s last decline in 2020, which was due to disrupted production during the Covid-19 pandemic. Tesla’s automotive revenue declined 13% year over year to $17.38 billion in the first three months of 2024.

Looks pretty bad. In fact, it pretty much confirms what we’ve argued about Tesla all along. We don’t care if the cars look good… we don’t care about the claims that it’s a technology company or an AI company or a data company.

We don’t care about any of that.

The one thing we know about it is that it’s a company with margins that are getting squeezed like a proverbial lemon as every day passes, as more competition enters the market, and as the legacy (especially German and Japanese) carmakers get better at producing a better EV product.

And if you want more proof of that margin pressure, you can look right at something else in Tesla’s results… it was the announcement that got the market excited:

The company said in the deck that it’s accelerating the launch of “new vehicles, including more affordable models,” that will “be able to be produced on the same manufacturing lines” as Tesla’s current lineup.

There isn’t a person in the auto industry who will tell you that building “more affordable” cars will help increase margins. So this news all but guarantees that Tesla’s margins will get dragged down to typical auto industry margin levels.

But as for the stock and investors… they didn’t seem to care. The Tesla fanboys were back at it.

And that’s why, as much as the bearish investor may feel tempted to short-sell Tesla stocks, we’d strongly suggest giving it a miss.

There are hundreds, if not thousands, of other stocks worthy of short-selling… at least as much, if not more than, Tesla.

For your sake, have a crack at them. Leave Tesla alone. The Tesla fanboys still have too much control.

Short-selling Tesla has made a mug of too many Wall Street hedge fund legends… it’s best to avoid joining them on this one at least.



Kris Sayce
Editor, The Daily Cut