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Tesla Shorts Lose $3.5 Billion After Delivery Surge

Tesla's recent surge in deliveries has left short sellers reeling, losing a $3.5 billion in two days of trading
July 5, 2024

Tesla’s recent delivery report has sent shockwaves through the market, especially for those betting against the electric vehicle giant. In just two trading days, Tesla’s stock surged by 17%, leaving short sellers with staggering losses of $3.5 billion, according to S3 Partners.

Since hitting its yearly low in April, Tesla's shares have skyrocketed by 73%. With the stock now at $246.39, it’s close to erasing its year-to-date losses. Short interest remains significant at 3.5% of float, representing 97 million shares and a notional value of $22.4 billion.

The recent report showed Tesla delivered 443,956 vehicles in the second quarter, surpassing Wall Street's estimate of 439,000. Although this represents a 4.8% year-over-year decline, it's a notable improvement from the 8.5% drop in Q1. The figures suggest that demand for Tesla vehicles remains robust despite challenges.

Tesla has been aggressively incentivizing purchases to combat declining sales, offering discounts and attractive financing options worldwide. In Germany and Norway, prices were slashed, while in China, zero-interest loans were introduced. In the U.S., a three-year, 2% APR financing deal for the Model 3 was made available.

Despite the buzz, Tesla’s newest model, the Cybertruck, has faced quality issues, resulting in four voluntary recalls in the U.S. since its launch. Additionally, Tesla’s core automotive business is still navigating stiff competition and an aging lineup.

The upcoming earnings report will shed more light on Tesla’s financial health, with analysts predicting a 2.9% revenue decline to $24.2 billion. Guggenheim Partners analyst Ronald Jewsikow noted that while financing promos boosted sales, sustaining demand will be challenging moving forward.

Elon Musk celebrated the short sellers’ plight on social media, taking a jab at Microsoft co-founder Bill Gates. Musk’s optimistic vision for Tesla’s future hinges on advancements in autonomy and the development of the Optimus humanoid robot, which he claims will transform Tesla into a trillion-dollar company.

However, Tesla’s immediate challenges remain. While software updates continue to enhance the user experience, the company has yet to deliver on its self-driving promises. Furthermore, Musk’s polarizing public statements and political affiliations are impacting Tesla’s brand perception, particularly among left-leaning consumers.

Tesla’s journey is a blend of remarkable innovation and significant hurdles. As the company continues to navigate these dynamics, the market will be closely watching its next moves.

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