The recent announcement by Tesla (NASDAQ: TSLA) regarding better-than-expected deliveries has resulted in significant losses for those who were betting against the electric vehicle (EV) maker’s stock.
Since the release of the second-quarter delivery report, Tesla’s shares have soared by 17% within a span of two trading days, causing an estimated $3.5 billion loss for short sellers based on market valuations, as per data compiled by Finbold from S3 Partners.
The subsequent increase in TSLA stock price prompted Elon Musk, the CEO, to issue a strong warning to short-sellers of TSLA, including Bill Gates, the founder of Microsoft (NASDAQ: MSFT).
As per Ihor Dusaniwsky, the Managing Director of Predictive Analytics at S3 Partners, short sellers have only realized mark-to-market profits of $1.37 billion, equivalent to a 7.6% return year-to-date.
“Shorting TSLA has been a profitable investment in 2024 until recently,” mentioned Dusaniwsky.
Nevertheless, short sellers experienced a decrease in their previous gains during June, incurring mark-to-market losses of $1.95 billion for the month, reflecting a 10.7% reduction.
On the latest closing day, Tesla shares concluded at $246.39, almost wiping out their yearly deficits.
Presently, the short interest in Tesla accounts for 3.8% of the float, equivalent to 105 million shares that have been shorted, carrying a notional value of $25 billion.
Cost-saving measures prove effective for Tesla
On July 2, Tesla announced second-quarter deliveries of 443,956 vehicles, surpassing Wall Street’s projection of 439,000. Although these deliveries were lower by 4.8% compared to the previous year, it marked a milder decline than the 8.5% drop witnessed in the first quarter.
The delivery report indicated that the demand for Tesla vehicles remains robust, though it presented a limited insight into the overall performance of the company. Tesla’s automotive segment encounters challenges due to a drop in sales resulting from an aging product range and heightened competition.
To incentivize electric vehicle purchases, Tesla introduced discounts, low-interest or interest-free financing options, and other perks to boost sales for several months. For instance, during the second quarter, Tesla slashed prices in Germany and Norway and rolled out zero-interest loan promotions in China, even for their base models like the Model 3 sedan and Model Y SUVs.
In the U.S., Tesla offered buyers of the rear-wheel-drive Model 3 a three-year financing deal at 2% APR.
Intense focus on Tesla’s Q2 earnings report
Despite the encouraging delivery figures, Tesla’s latest vehicle model, the Cybertruck, saw a sluggish start due to quality concerns leading to voluntary recalls in the U.S. within a short period.
The upcoming earnings report from Tesla, scheduled for July 23, is anticipated to offer a more detailed view of the company’s financial state. Analysts predict a 2.9% revenue decrease to $24.2 billion following a 9% decline in the previous quarter.
This report will play a critical role in deciphering Tesla’s capability to overcome existing challenges and uphold its market position amidst intensifying competition and an aging product range.
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