Tesla’s (TSLA) post-earnings stock rally has cost short sellers billions.
Tesla short sellers lost $4.2 billion in the two days following the EV maker’s third quarter earnings last Wednesday, according to data from S3 Partners.
Tesla reported a higher-than-expected third quarter profit and improved margins after the bell Oct. 23. Those beats helped Tesla stock notch its biggest single-day gain in a decade. The stock jumped 22% last Thursday, its best day since 2013, and shares rose another 3.3% Friday.
Tesla stock was up roughly 1% on Monday.
This isn’t the first time this year that short sellers have paid dearly for betting against the Elon Musk-helmed company. In the week following Tesla’s better-than-feared fiscal first quarter earnings report in April, short sellers lost more than $5 billion.
Tesla’s stock performance has been volatile over the past month. Shares sank in early October as the automaker missed Wall Street estimates on its third-quarter deliveries, issued a recall, and discontinued a lower-priced model. Then, the stock rose in anticipation of Tesla’s robotaxi unveiling, only to fall sharply when the event failed to live up to hype.
Tesla’s most recent rally last week comes despite mixed third quarter results. While Tesla beat Wall Street’s forecasts on its adjusted earnings per share and gross margin, its quarterly revenue of $25.18 billion was lower than the $25.4 billion expected, according to Bloomberg consensus estimates.
A slew of Wall Street analysts from Morgan Stanley (MS), Bank of America (BAC) and Deustche Bank (DB) to Wedbush, Cannacord Genuity and William Blair have reiterated their Buy ratings on Tesla stock following the report. Bank of America also raised its price target on the stock to $265 from $255.
While Tesla’s recent focus on its AI ambitions had left investors feeling skittish, Morgan Stanley analyst Adam Jonas said he was encouraged by Tesla’s emphasis in its third quarter earnings call on revving up its auto business, which accounts for 80% of Tesla’s revenue. Jonas pointed to CEO Elon Musk’s comments about targeting 20% to 30% growth in electric vehicle deliveries in 2025 while focusing on lowering production costs.
“As investors struggle with the business model shift from auto to AI, this print reminds us growing the auto business profitably remains a high priority,” Morgan Stanley’s Adam Jonas wrote in a note to investors.
Meanwhile, 20 of the 60 analysts covering the stock tracked by Bloomberg have a Hold rating on the stock and 15 analysts recommend selling shares. On average, they see shares falling to $228 over the next 12 months, according to Bloomberg consensus estimates.