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Shorting Tesla in 2024? Bernstein Says Best Idea, Musk Calls It Contrarian Indicator
According to Bernstein analyst Toni Sacconaghi, who holds a bearish view on Tesla with a price target of $150, there is a possibility that the stock could experience a 40% decline within the next year.
Moreover, there is still high short interest in Tesla, indicating a significant number of investors are betting on the stock to decrease in value. Recent data from S3 partners shows that approximately $18.63 billion or 3.03% of the company's entire float has been bet against by investors. This level of short interest remains the highest in the world.
Why Does Sacconaghi Hold A Bearish View on Tesla?
● Tesla Faces Demand Challenges Due to Product Line Saturation
Tesla is facing challenges in meeting its target of delivering 1.8 million vehicles this year due to weak demand. "Tesla continues to have a demand issue," he said.
Sacconaghi believes Tesla's product lineup is too narrow and expensive, leading to saturation in the market. He also expressed concern about this saturation and its impact on the company's future growth prospects.
● Price War and Cybertruck Production Ramp Up Lead to Decline in Profit Margins
According to Sacconaghi, Tesla had to reduce prices by 16% in 2023 to boost demand and will have to do so again in 2024. As a result, this carmaker initiated an intense price war that has eroded its auto gross margin,resulting in a downward trend since the fourth quarter of 2021. The company's latest earnings report for the third quarter ending in September 2023 shows the core auto gross margin at 16.3%, which missed the consensus estimate of 18.02% by a significant margin. Investors were further concerned when Tesla declined to comment on the near-term margin trajectory.
Meanwhile, Sacconaghi believes that Tesla's recently launched Cybertruck will have limited market appeal, and as the company ramps up production into 2025, it will ultimately weigh down on Tesla's profit margins. He predicts this will lead to a decline in Tesla's gross margins by 100 basis points in 2024.
● The Disparity Between Tesla's FY23 Financial Performance and Stock Price
Given the disconnect between Tesla's FY23 financial vs. stock performance, investors may ask "why now and what will be different in 2024?" Our belief is that Tesla's valuation has been supported by growth expectations, even as margins have eroded."
We expect delivery and revenue estimates for 2024 and 2025 will come down materially. While significant downward EPS revisions had no impact on Tesla's stock this year, we believe a waning of the growth narrative could weigh on the stock's multiple (currently ~75x 2023 earnings, well above higher margin, growth stock peers)," analyst concluded.
Tesla Enthusiast Dismisses Analyst's Bearish Call on Tesla Stock
However, Tesla investors were quick to rebut Sacconaghi's remarks, as they didn't receive his comments well. A Tesla enthusiast, Jim Hall, pointed out on X that the analyst has never issued a "Buy" rating for the stock since he started covering it in 2016 when it was valued at $16.
Missing & fighting AGAINST a 2500% gain & has been dead wrong for nearly a decade," Hall said.
Musk also commented on Hall's post, saying, "So strong contra-indicator then."
Tesla does indeed have impressive performances in many areas, such as its investment in AI. Analyst Michael Tyndall wrote that while Tesla's current revenue and profits are largely driven by vehicles, the company's future growth will rely on advancements in robotics, autonomous driving, energy storage, and supercomputers.
The Optimus humanoid robot project, also known as Tesla Bot, could be available for sale between 2025 and 2027. Musk has consistently praised Tesla's Full Self-Driving (FSD) technology and its potential value to the brand. Furthermore, the continuous development of Tesla Dojo will give the company an advantage in artificial intelligence and autonomous driving technology.
The first two explanations cited by the analysts for their bearish view are particularly pronounced in the China region. Recent data reveals that Tesla's China sales have experienced the largest drop in almost a year,while its Chinese competitor BYD has reached record sales of 301,378 units - marking a 31% increase from last year.
So, mooers, how do you view Tesla's stock performance in 2024?
Source: CNBC, The Street, Investing.com, Barron's, Benzinga
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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71540950 : Toni the perma bear has a very narrow vision of what Tesla represents and that will never change.
Rexon Capital : If you want to be another Jim Chanos that lost billions and end up on the street, be like Toni
goodfortune : follow morgan stanley view..