Tesla Shorts Break The Internet

The most expensive automaker on the planet has a long history with short-sellers, but Elon Musk looks set on getting the last laugh with Tesla’s latest stunt

Don’t worry, I will not just be discussing Tesla’s (NASDAQ: TSLA) latest pivot into the fashion industry — see cover photo — but the stunt is simply too weird to ignore. CEO Elon Musk has taken his Twitter (NYSE: TWTR) feud with Tesla short-sellers to a whole new level, whilst also taking a swing at the Securities and Exchanges Commission (SEC). 

In a series of tweets, Musk asked, ‘Who wears short shorts?’, and said that “Tesla will make fabulous short shorts in radiant red satin with gold trim,” and “Will send some to the Shortseller Enrichment Commission to comfort them through these difficult times.” And by golly, it looks like he’s actually gone and done it. I wonder if the shorts are part of the new line Elon’s pal Kanye West is developing with GAP (NYSE: GPS)? 

All of this madness aside, it might be time for short-sellers to reconsider the possibility that Tesla may be on its way to greatness and is no longer just a ‘hype stock’ in the vein of Beyond Meat (NASDAQ: BYND) or Virgin Galactic (NYSE: SPCE). 

Is Tesla joining the S&P 500? 

The ‘adult table’ of the U.S. stock market has traditionally been the S&P 500 (NYSEARCA: VOO). Should Tesla get a seat with the best of the best, it will be joining the likes of Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), Amazon (NASDAQ: AMZN), and 496 more players. 

In recent years, Tesla has been knocking on the door of this exclusive index and fits almost every criterion from which the index’s committee would pick it, which included the company’s liquidity, size, and industry. However, despite its market cap soaring, its share price sitting at more than $1,200 as of July 2, and it being the most valuable car company in the world, it has still not posted 4 consecutive profitable quarters. 

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However, Tesla has posted three consecutive profitable quarters — despite the coronavirus pandemic — and having smashed Q2 deliveries with 90,650 units, the company looks on the verge of having a profitable 12 months. 

Of course, this is no guarantee that Tesla will be admitted even if it should meet the criteria, especially as another company must then be removed to make room. However, at its current trajectory, it seems only a matter of time before it kicks down that door. 

Can Tesla hit $2,000 per share?

As we like to do in investing, we never settle. Having just surpassed the $1,000 per share mark, we now want to know if and when it can hit the $2,000 mark. Tesla is on a roll this year, rallying 234% since its March lows and should it prove profitable once more in its Q2 earnings, we are likely to see it keep rising. 

Barring any sort of stock split or a complete disaster, Tesla would need to rise 66% to breach the $2,000 per share mark this year. For a company that is already up 180% YTD, this is a tall ask, but not impossible. 

China has become an important market for Tesla and has successfully opened a Tesla Gigafactory in Shanghai in the last year, it is going from strength to strength. Demand for ‘Model 3’s’ is said to be skyrocketing in the region, even despite the availability of Chinese competitor NIO (NYSE: NIO). China’s electric vehicle market is one of the fastest-growing in the world with a CAGR of 25% between 2020 and 2025, and with Tesla in the proverbial driver’s seat, it stands to gain the most from this trend. 

Even in the U.S., where companies such as Nikola (NASDAQ: NKLA) and Ford (NYSE: F) are offering competition in the EV market, Tesla still reigns supreme, as proven in its blowout delivery figures for Q2. 

Of course, predictions are not a guarantee, and a lot has to go right for Tesla to hit that elusive $2,000 milestone. While the world is suffering from a devastating revival in coronavirus cases, a struggling economy and further lockdown measures could see Tesla sales dip once more.

MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.