Tesla, the brainchild of Elon Musk and a pioneer in the EV space, has found itself at the top of an intriguing list for the third straight month: the most shorted large-cap stock in the US.
A little primer for those new to the investment game: when investors “short” a stock, they’re essentially betting on that company’s share price to drop. It’s a high-risk, high-reward strategy that often makes headlines when it goes awry (or exceptionally well).
In a recent analysis by securities firm Hazeltree, not only did Tesla secure the top spot, but Charter Communications and Apple also made the cut, ranking second and third respectively. Now, that’s a trio of giants right there, which makes one wonder: What are the skeptics seeing that the bulls aren’t?
The story gets spicier. In a classic Musk move, the entrepreneur took to social media after catching wind of an article highlighting Bill Gates’ previous wager against Tesla. Musk didn’t hold back, pointing out the inherent risk of such a strategy: “Only if a company goes bankrupt will you see maximum returns on a short position,” he commented. And, as Musk emphasized, this bet against Tesla came during one of the company’s more vulnerable periods. The implication? Such a significant short position can depress stock prices, which can impact the average investor.
However, while some investors are skeptical, others are doubling down on their Tesla love. The stock recently witnessed a 10% boost after Morgan Stanley’s latest research note painted a rosy picture, even upgrading Tesla to “Overweight.”
What’s fueling this bullish stance? Look no further than Tesla’s Dojo supercomputer. Morgan Stanley believes that this technological marvel could potentially add a staggering $500 billion to Tesla’s market cap. Drawing parallels with Amazon, the analyst Adam Jonas remarked, “Just as AWS contributes to a whopping 70% of Amazon’s total EBIT, Tesla could similarly tap into newer markets that aren’t just about selling vehicles.” The secret weapon here is the Dojo, Tesla’s in-house supercomputing initiative that’s been under wraps for half a decade.
So, with such contrasting views on Tesla’s future, the only certainty is that the road ahead promises to be intriguing. For investors, this might be a reminder that in the world of stocks, today’s favorite can easily be tomorrow’s underdog and vice versa. The key? Staying informed and always diversifying.