Short-sellers, longtime haters of the billionaire's electric-auto company, were left licking their wounds after some positive commentary from one of Wall Street’s biggest skeptics, saddling them with $575 million in mark-to-market losses on Monday.
Those betting against Tesla have now lost about $1.85 billion this year, according to the financial-analytics firm S3 Partners. Much of those losses have come in the final weeks of the year.
Monday's losses came after Credit Suisse analyst Dan Levy suggested the company is “leading in the areas that will likely define the future of carmaking – software and electrification.”
He added that Tesla is “likely ahead of others on batteries – the core of the electric powertrain.”
The comments ignited a short squeeze in Tesla shares, which rallied 6.5 percent on Monday to close at $381.50 apiece – just below their record high of $385 that was set on Sept. 18, 2017.
Tesla is the third-most targeted U.S. stock by short-sellers with $9.16 billion of short interest, according to S3 data. About 25.55 million shares, or 19.1 percent of the float, are currently being shorted.
The pain for short-sellers “should only continue” as they unwind their bearish bets, a trend that has been going on since the middle of the year, Matthew Unterman, director of equity research at S3 Partners told FOX Business.
Any further pain inflicted on short-sellers is likely to bring a smile to the face of Musk, who recently suggested that: “short selling should be illegal.” Musk has also waged a public battle against one of Tesla's largest short-sellers, hedge-fund manager David Einhorn, as reported by FOX Business.
Levy, who is one of the most bearish Tesla analysts on Wall Street, maintained his “underperform” rating and $200 price target – 47.5 percent below where shares finished on Friday.
He isn’t the only Wall Street analyst who has recently expressed optimism over Tesla’s business.
Last week, Deutsche Bank analyst Emmanuel Roser wrote that “demand trends appear to remain solid, and Tesla seems on track to deliver on multiple product milestones over the next few quarters.” He added that with $5.3 billion of cash on hand, he sees “little reason for a capital raise in the near-term.”
Roser maintained his “hold” rating and $290 price target.
The electric-car maker earned a surprise profit of $143 million in the third quarter after recording a $1.1 billion loss during the first two quarters of the year. The report helped the stock turn positive for 2019.
Despite the unexpected gain, Wall Street is notably mixed on Tesla. Of the 33 analysts surveyed by Refinitiv, 11 say “buy,” 9 suggest “hold” and 13 recommend “sell.”
Tesla shares have gained 7.7 percent this year, underperforming the S&P 500’s 27.3 percent gain.