How To Short Tesla Stock And Why No One Wants You To Know

How To Short Tesla StockHow to short Tesla stock?  I can hear it already, Tesla’s stock is going to explode for double, no triple, NOOOO quadruple its current price. (TSLA $253.75)  These are all things that investors have told me over the last few months.  I am here to say that I don’t believe that you will be seeing that happen any time soon.  This stock has enjoyed some major price appreciation over the last 6 years.  To be exact, this stock has climbed to being over 1200% up since July 2nd, 2010.  That is 1200 percent!  If you invested a mere $10,000 back then, in only 6 years, it would be worth $120,000.  That is the kind of returns you dream of.  Take a look at the chart below, and you will see that it is trading at almost an all time high.  This is great if you are the investors who bought into this company during the initial public offering, but if you are recently taking a long position, it is much more scarier.  The stock lost about $100 per share in under one year from 2015 to 2016 before recovering that lose and sum.  But now we find ourselves staring at a chart that shows some real resistance at the current level.  So let’s take a look and see what the real reasons are why Tesla came back from a horrible 2015 and why you might to know how to short Tesla stock.

How To Short Tesla Stock

Why Tesla Stock Price Will Fall in 2017

I am not going to make many friends with this article, that I realize already.  But I am writing this because I want to pad my portfolio, not my Christmas card list.  So with that being said, let’s take a look at why Tesla stock price will fall in 2017 and how to short Tesla stock in order to maximize our portfolio gains.



Tesla was starting to correct like a champ when they started quite a few announcements concerning the new Tesla Model 3 that is expected to be out in 2017.  The Tesla Model 3’s release date is at the tale end of 2017 to boot.  This is a very optimistic call by the company when they have been suffering from issues/delays from the other two cars that they released.  Now we have the Model 3 being hyped up as a game changer coming to the market next year.  Tesla has had the help from Uncle Sam on this one though.  The government gave out tax credits for the first 200,000 cars that they sold.  This created a pretty decent sale price for those looking to get a Tesla Model 3 at an affordable, or at least a more realistic price.  Investors have to wonder how the sales numbers will look once these tax credits are gone for future models.  We also have to understand that the other car manufacturers are not just sitting around producing old gas guzzlers.  They are creating their own version of the electric vehicle.  They also make it hard to financially chose an electric car over their gas vehicles when it is more expensive to own one in the long run.  The extra cost you pay for the electric car easily outweighs the savings you get from the electric use.  I understand that their are those out there that would pay a premium to have a better environmental footprint, but that is the exception and not the rule.

How To Short Tesla Stock And Why No One Wants You To KnowThe answer to how to short Tesla stock comes easily when you look at the numbers.  At this point, it is a fundamental analysis for me that shows the future of Tesla.  They are well loved by a good sized following, but are burning through money at rates that are unsustainable.  In 2014, they had a total of 31,655 automobiles delivered to their customers.  This equated to a major loss of $294,000,000 and that is before any possible recalls or warranty work that would be worked on in the future years regarding these vehicles.  The sells is only half the battle for Tesla.  Every article, it seems, discusses Tesla like they have no competition.  The fact is that if the electric vehicle market explodes, there will be a ton more competition to shrink those gains that they are banking on.  The major automobile companies sold over 9 million cars while Tesla sold a mere 31 thousand.  Is there room for Tesla to grow?  Absolutely, but when the other giants see that Tesla is cutting into their share in a more meaningful way, they will come at them with more experience and less expensive alternatives.  They will also have the regular gas vehicle sales to supplement them during this period of electric car growth.  That is something that Tesla will not have the benefit of having.  Who pays the price of this learning curve?  The stockholders of Tesla and the price of the stock.  Fundamentally speaking, Tesla is trading at levels that makes no sense.  They are losing hundreds of millions of dollars annually and have yet to prove that they will be able to defeat the major companies once they decide to go “all in”.   If we couple this with the free cash flow numbers that this company has, then you start to see that the future is not all as bright as all the writers are making it out to be.  Take a look at the chart below showing Tesla’s free cash flow and you can start to see what some of us that are taking a closer look at starting to see…long term trouble and how to short Tesla stock for maximum returns.

How To Short Tesla Stock And Why No One Wants You To Know

With Tesla having, what I am estimating to be, less than $1 billion in cash reserves, they will have to raise capital again for their ambitious goals of growth over the next few years.  Once again, where is the profit coming from to make up for this cash burn?  1 year away?  3 years away?  10 years away?  When will they start not just turn a profit, but actually turn one that shows that their share price is fundamentally correct.  At this point, we see a stock that is being held up by those that think they can be the most dominant car company ever.  I just don’t see it.  With the building of the gigafactory, the expenditures will become even larger, not smaller like many investors believed was going to happen through 2017.  You can see from the chart below that they continue to lose money at clips that would bankrupt most companies.  You can see that sales double from 2013 to 2015, and yet losses went up 7 times the 2013 levels.  This is a very alarming trend that needs to be addressed.  What that is showing us is that as they sell more cars, they are losing more money.  They are estimated to lose over $19,000 per car according to newsmax.  They increased loss per vehicle from $15,975 to $19,810 quarter over quarter.  Does this sound like they are starting to have better profits per vehicle sold as they gain more experience?  And yet the stock goes higher…and higher…and even higher.  So I realize I am going out on a limb here, but this seems just like the housing market to me during 2007.  It is unsustainable in the long run.  Once the government stops giving tax credits and the other major manufacturers get into the game, you are going to see continuing losses and Tesla seeking more money from investors to stay afloat.  When figuring out how to short Tesla stock, it looks like until they make a real profit on the selling of a vehicle.

How To Short Tesla Stock And Why No One Wants You To Know



As stated before, this company is a great idea that needs to happen and that is why everyone is excited about it.  But good ideas don’t succeed in the long run just because they are good for the planet and something that people “think” should be done.  You see, people have limited money and will buy cars that give them the most bang for their buck.  The Tesla is still too expensive for a normal family and the lack of refueling stations around the country will limit where this vehicle can be used.  Think about trying to drive Disney World in a Tesla from the northeast of the country.  You can go a few hundred miles and then what?  You need to recharge it and that takes time.  At home, the battery only gives you 29 miles per hour of charge.  There are super chargers that will get the battery half charged in 20 minutes.  Ugghhh…can you imagine telling the kids that they have to sit in the car for 20 minutes while you “fill” it.  And remember, this is only to get it to half charged.  So you will be repeating this in only a few more miles.  Does this seem like a family friendly vacation vehicle?  To me, this is a major flaw in those thinking that Tesla will become a household vehicle.  The infrastructure around the country is years, if not decades, behind where it needs to be in order for normal families to be able to use a Tesla like vehicle on road trips.  This is just one of many issues that Tesla with have to deal with as time goes on.  As long as gas vehicles get more out of every dollar of cost per mile, then electric vehicles will take a backseat to the future of automobiles.  Tesla investors will eventually see, in terms of share price, that their company is much like the old housing market and will have a very hard landing once people realize that those kinds of losses are unsustainable.  I am not saying that they are going bankrupt, but they are definitely not worth the $253.75 per share they are selling at.  If that stock lost a $100 a share, I would still be writing this article with the same idea of shorting them.  I hope that I wrong in that the world won’t pay a premium for their electric vehicles, but my fundamental sense tells me otherwise.  But if you want to know why and how to short Tesla stock, at least you have an idea now.






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How To Short Tesla Stock And Why No One Wants You To Know

Comments

  1. Hate to say it…told you so. Tesla is now trading around 20% lower. Not a bad rate of return for a 5 month period of time. Is there more downside to this stock? ABSOLUTELY! I find stocks that trade with a negative PE very hard to buy. This stock is no different. The Volt is rolling out at under $30,00 and in some states, at around $23,000 for a electric that gets over 200 miles to a charge. Sorry Tesla…you are overpriced.

  2. Stock Moe ,

    Your selection of TSLA as a short candidate WAS/IS spot on …I can tell you that like FNMA we picked this up in the Chart Action which is almost carbon copy replica and as such we have this piece of trash going back down to $40+/- before the Die hard longs decide to bail.The share through tremendous bad management could go to the THE TRASH HEAP

    • It is always hard to write about overpriced stocks due to the nature of most investors being long in the market. But if you are looking at the financials, it is next to impossible to miss how overpriced Tesla was and still is. Thank you for the comment…Stock Moe.

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