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Be Cautious of Short Sellers Betting Against Tesla (NASDAQ: TSLA)

In Defense of Tesla (NASDAQ: TSLA)

Written by Jeff Siegel
Posted April 27, 2019

Tesla (NASDAQ: TSLA) shorts piled on big last week.

After disappointing earnings, it was certainly fertile ground for a short attack.

Most outspoken was was Gabe Hoffman, from Accipiter Capital Management, who said the following …

“The biggest issue for the stock is that Elon Musk — basically the lying magician — is not able to tell investors or his, you know, cult followers.”

Clearly Hoffman has an issue with Tesla that goes far beyond its valuation. Calling Musk names and referring to Tesla fans as “cult followers” are the actions of an analyst that likely has been hoping for the company to fail from day one. It also makes his analysis, or better yet, his intentions, highly questionable.

Hoffman also stated that the business has completely collapsed. This is not true, by any stretch of the imagination, and begs the question, why is Hoffman telling lies while accusing Musk of being a liar?”

Now in all fairness, Tesla does have a lot of issues, Just as it always, has, really.

And for many valid reasons, few analysts are bullish on the stock.

Make no mistake: This is not a stock for the risk-averse.

But the truth is, Tesla does make an amazing product, and say what you want about Musk, but that guy has built something truly special with Tesla. To be honest, if it weren’t for Musk’s vision, it’s unlikely that there would be any major car makers putting electric cars on the road today.

Tesla showed the world this could be done, and that consumers wanted these vehicles. This is why GM and Nissan are making them. There’s no other reason.

All this being said, I’m not a buyer of the stock.

But I’m sure as hell not shorting it, either.

I’ve seen how shorts have performed in the past with Tesla.

And for the most part, history tells us that betting against Tesla, more times than not, doesn’t work out too well.

Of course, those who are short Tesla seem to be quite outspoken about making that bet, anyway.

Take Carson Black, the founder of Muddy Waters, who said the he doesn’t think the company is ever going to achieve the kind of scale necessary to be able to compete with the competition that is coming online in electric vehicles.

Nevermind the fact that last year, Tesla locked in 80 percent of all US electric vehicle sales. That’ s not to say this number is an accurate portrayal of what the future holds, but it tends to be conveniently left out of the conversation when shorts attack.

Black’s argument is also a bit short-sighted, and doesn’t take into account that Tesla is not even competing with GM’s Bolt or Nissan’s LEAF, either. While GM and Nissan have built solid electric vehicles, they’re still not in the same category as a Model 3 or Model S. They simply don’t offer the same level of safety, performance, or technological innovation as Tesla.

Tesla doesn’t have to make as many cars as GM, Nissan or any other major car maker to be successful, either. It just needs to make enough of its cars to keep pace with demand. Which is robust, despite last quarter’s slowdown.

Those who see a dip in sales in one quarter, then quickly announce the “end of Tesla,” are fools.

To be honest, this is the kind of talk I remember hearing about Amazon (NASDAQ: AMZN) for years after it went public. The same defeatist attitudes about the company never being able to reach its goals. Today, Amazon is untouchable.

Again, I’m not a buyer of Tesla stock. But I’m also not a buyer of what some of these shorts are selling: This idea that Elon Musk is a scam artist or that the company is about to go belly up. It’s a bunch of horse shit.

The bottom line is that I’ve been hearing this nonsense for more than a decade now, that Tesla would “never make it.”

And despite a very rough quarter – something that Tesla has dealt with in the past, on many occasions – those beautiful electric cars are still rolling off the line, and thousands upon thousands of very excitable buyers are happily handing over their hard-earned cash to get one in their garages.

That ain’t gonna change anytime soon.

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