In response, experts told the Beijing News in an interview that behind the rise of Teslas share price, there are both performance support and speculation in the capital market. After reaching a high of nearly $1000 on February 4, adjustments may be triggered, which is not likely to continue for the time being.
According to data from financial technology analysis company s3partner, from 2020 to now, Teslas short position has lost 12 billion US dollars. However, there are still short sellers who choose to continue to snipe Tesla. Andrew leford, founder of citron, a well-known shorting agency, said on February 5 that citron was shorting Tesla and believed that if mask was a fund manager, he would also choose to short Tesla at this time.
Teslas surge drives domestic suppliers up
On February 5, Tesla rose six consecutive days, closing at $887.06 per ads, up 13.73%. Thanks to the sharp rise of Teslas stock price in recent days, domestic Tesla related concept stocks also rose sharply, and Tesla suppliers such as Ningde times, Weitang industry and yamadon touched the limit on February 5. In addition, shares of new energy vehicles such as Yulai automobile and BYD also rose sharply, reflecting that the prospect of new energy vehicle industry is still promising.
China Merchants Securities predicted that Teslas sales volume this year is expected to reach about 600000. At present, high-quality supply chain companies not only get orders for model 3, but also overseas Tesla orders are constantly gaining. Teslas industrial chain is characterized by strong stability, high gross profit rate and large value. The low cost of Chinese enterprises determines its dominant position in Teslas industrial chain, and the industrial chain companies with core competitiveness are expected to enjoy long-term climbing dividends.
Due to the decline of new energy subsidies, last years domestic new energy vehicle market declined for the first time on a year-on-year basis. However, Miao Wei, Minister of the Ministry of industry and information technology, said earlier that the policy of this years decline of subsidies may be more gentle, which will support the new energy vehicle industry. Xu Haidong, Assistant Secretary-General of the China Automobile Association, predicted that the overall new energy vehicles will be flat or slightly increased in 2020, and that the sales volume of new energy vehicles this year is expected to be about 1.2 million, based on Teslas expected sales volume of 100000 vehicles.
The short sellers didnt admit defeat, citron said to snipe Tesla
Although Teslas share price continued to rise, short sellers did not give up shorting Tesla. Andrew leford, founder of citron, a well-known shorting agency, said on February 5 that he was indeed shorting Tesla and that people who bought Tesla at this price would be cleaned.
This shows the rise in share prices due to computer transactions, not a real reflection of the value of the company. We loved Tesla and promised never to short again, Andrew leford said on social media. But when AI trading algorithms start to drive the market, we believe that even musk, if he is a fund manager, will short the stock. It has nothing to do with technology anymore, it has become the new wall street casino.
Citron has always been a short seller of Tesla, but announced in October 2018 that it will not short Tesla, and pointed out in the research report that Tesla is seizing the market share of luxury cars in the United States. Andrew leford said at the time that he gave up his strategy of shorting Tesla in the past five years after learning more about the electric vehicle industry. Citron cites data from auto consulting companies to point out that model 3 will not only be profitable, but also have a gross margin of at least 30%.
However, when Teslas cash flow deteriorated in April last year, citron turned short again, believing that the companys cash consumption and capital demand were too large to continue to be bullish. After that, Tesla had to start $2.2 billion financing, and the companys share price began to rebound after hitting a new low of $176.99 in June last year, and set a new high in the companys share price one after another.
In the eyes of many, Teslas valuation should not be calculated by traditional car companies, but should take into account its auto driving technology and robotaxi business. This is similar to the first iPhone released by apple in that year. Teslas electric car will redefine smart cars, and its revenue will not only be from car sales but also from software. Ark fund, an investment institution, predicts that Teslas expected share price will rise to $7000 in 2024, provided that Teslas annual sales volume will reach 7.1 million at that time, and the robotaxi business will generate high profits far higher than those of Uber and other online car Hailing platforms.
He Xiaopeng, the founder of Xiaopeng auto, who claims to hold a large number of Tesla shares, said that in ten years, there will be many companies with a market value of more than $100 billion to $1 trillion in smart cars, but he thought that there is a huge difference between cars and mobile phones, so its difficult to form a huge winner take all and super high gross profit. So I havent seen the logic of such high valuation (Tesla) at present, unless its true A positive long-term holder.
Why does the stock price soar?
Last years four quarters report was brilliant, Shanghai factory stimulated the stock price to rise
Since the release of the third quarter results on October 25 last year to eliminate market concerns, Teslas share price has entered the rising channel, especially in 2020, the share price has accelerated to rise, which makes Tesla not only surpass Ford, general motors and other auto companies with the highest market value in the United States, but also only inferior to Toyota, ranking the second largest auto manufacturer in the world.
The basic support for the rise of Teslas stock is that the Shanghai factory has completed the acceptance and put into production and the financial report of the third and fourth quarters of 2019 published in the same period performed well. Before that, there were concerns that the U.S. economy might fall into recession. The Federal Reserve began to cut interest rates three times in a row since August 2019; during this period, Teslas stock was once cut back to $179. But the third quarter results showed Tesla was profitable, and the successful completion of production acceptance at the Shanghai plant stimulated the stock price to climb rapidly from $254 to around $354. Zhao Xiangbin, chief strategic analyst of BRICs Huitong, told the Beijing news that Teslas share price rose, supported by the basic economic trend, boosted by financial reports, and stimulated by Chinas bookings. Teslas model 3 bookings were hot before the Chinese new year, and in January 2020, more than 1000 bookings were made every day.
In fact, from the perspective of the companys fundamentals, Tesla got rid of the haze in the first half of 2019, and ushered in many good news in the second half of the year, including two consecutive quarters of profitability in the third quarter and the fourth quarter. Teslas cash and cash equivalents increased $930 million to $6.3 billion as of the fourth quarter of 2019. Free cash flow was $1.01 billion, an increase of 173% month on month, reflecting that the companys cash flow is no longer tight.
In addition, after Tesla completes its 2019 delivery target, the company plans to increase its delivery target to 500000 vehicles this year. Tesla will start to deliver model y this year, and it is expected that the capacity of Fremont plant will be further increased to 500000 vehicles / year in the middle of this year. If Shanghai Super plant climbs smoothly, Teslas total capacity is expected to reach 650000 vehicles.
Is there a capital push?
The rich shareholders spoke up and the short sellers began to close their positions
In Zhaos view, institutions are actively long, and capitals massive intervention has pushed Teslas share price higher.
Billionaire Ron Barron is firmly optimistic about Teslas future. His company, Barron capital, has always been an important shareholder of Tesla, holding 1.6 million shares, which is worth US $1.3 billion. On February 4, Beijing time, he told CNBC that Teslas revenue is expected to reach $1 trillion in 10 years, and he will not sell any shares of Tesla. Ron Barron believes that Tesla is expected to become one of the largest enterprises in the world, and the premise of $1 trillion revenue is assuming that Tesla will sell 10 million electric vehicles every year, which is noteworthy that Teslas energy business has not been included.
Another factor in Teslas surging share price may be short covering. Since the companys listing, Tesla has always been the Darling of short sellers in the US stock market. In addition to the unstable financial data, masks personal character has also become the reason for short. In August 2018, mask announced the privatization of Tesla on twitter, but it was later proved that the funds were not in place, which led to the collective prosecution of Tesla and himself by short sellers. In the end, musk had to resign as chairman of the board of directors and hire more independent directors to supervise his comments on twitter.
Today, the continuous rise of Teslas stock price forces more and more short sellers to close their positions and stop losses, which on the contrary accelerates Teslas upward momentum. According to the data of financial technology analysis company s3partner, from 2020 to now, Teslas short position loss has reached 12 billion US dollars. As of the closing on February 3, Teslas open short position still has 24.1 million shares, 160000 shares less than the previous trading day. The open short position accounts for 18% of the circulating shares, with a nominal market value of 18.8 billion US dollars.
Can the rally last?
Expert: the growth rate is too high and too fast. Short term suggestions: short term adjustment
Dong Baogen, director of bedrock capital investment, pointed out in an interview with the Beijing news that Tesla really ushered in a turning point in profitability and strong cash flow. Looking forward to the early mass production of modely, the success of Shanghai plant, the improvement of localization rate of parts and the popularization of automatic driving will further improve the profit margin and bring up the catalyst, but in the short term, we need to closely observe the actual delivery in the second to third quarter of 2020.
Zhao Xiangbin, chief strategist at BRICs Huitong, told reporters that the current surge is unlikely to continue. Tesla jumped short and opened high on February 4, and closed at the cross line on Tuesday. There is a need for technical adjustment. It is very likely that the stock price will fluctuate to a high below $1000, or even the trend of filling the gap below will not be excluded. The current growth rate is too high and too fast, which is likely to trigger profit taking before the important resistance of $1000. Therefore, short-term adjustment is recommended.