Data showed that hedge funds had been heavily shorting Tesla before the latest sales data was released, but the subsequent data released by the electric car maker triggered a sharp rise in the stock price.
About 18% of more than 500 hedge funds tracked by data provider Hazeltree held overall short positions on Tesla at the end of June, the highest proportion in more than a year. By comparison, the proportion was just under 15% at the end of March.
Those bets against the market may now leave the hedge funds that made them in the red. Tesla’s sharp rebound has cost short sellers more than $3.5 billion, according to S3 Partners.
Tesla released its latest vehicle sales data on July 2, showing that its second-quarter deliveries exceeded analysts' expectations, although sales fell. Investors quickly seized on the news, pushing the company's stock price to a six-month high, up 26% for the week, and Tesla's stock price has soared about 40% since the beginning of June.
At the same time, because of this surge, Tesla's market value returned to the top ten of US stocks, and Musk's personal wealth soared by nearly US$30 billion, once again surpassing Amazon founder Bezos and regaining the throne of the world's richest man.
Tesla's profit margins could improve due to lower production and raw material costs, according to Morningstar's Seth Goldstein, one of the top three stock analysts ranked by Reuters. Goldstein said in a note to clients that the company could "return to earnings growth" next year. But he added that how Tesla handles the market for lower-priced electric vehicles will be crucial.
The development reflects a continued sense of uncertainty about how to handle the broader electric vehicle market. In the United States, Trump said he would roll back existing laws supporting new energy vehicles if he becomes president again after the November election, calling them "crazy." However, Tesla CEO Musk said Trump is a "huge fan" of Tesla Cybertruck.
Meanwhile, Tesla is in a state of internal chaos. In April, Musk told employees to prepare for large-scale layoffs, which also affected sales positions. Cybertruck, Tesla's first new consumer model in many years, has been slow to gain market share.
As a result, some hedge fund managers have decided to avoid the stock altogether. Fabio Pecce, chief investment officer at Ambienta, said Tesla is "very difficult to position for us." He said, "It is basically unclear whether we are dealing with 'a top company with a great management team' or 'a franchise company facing challenges and insufficient corporate governance.'"
However, he said, "If Trump wins, it will be very positive for Tesla, although this result is obviously not good for the electric car company, but Trump is expected to impose large-scale tariffs, which will be good for Tesla."
According to a survey by foreign media, investors said at the end of 2023 that they may further withdraw from the clean energy market, especially the electric vehicle sector. Almost two-thirds of the 620 respondents said they planned to stay away from the electric vehicle industry, and nearly 60% expected the iShares Global Clean Energy ETF to continue to fall in 2024. The ETF has fallen 13% so far this year and fell more than 20% in 2023.
The electric vehicle price return index compiled by foreign media, which includes BYD, Tesla and Rivian, has fallen by about 22% so far this year. At the same time, the metals and minerals needed to produce batteries are affected by volatile commodity markets, and price fluctuations mean that some battery manufacturers have to adjust their profit margins to adapt to market changes.
Against that backdrop, more traditional automakers are finding themselves under shareholder pressure to slow capital spending on electric vehicles. Valuations in the electric vehicle space have become so depressed that he now avoids shorting the sector, said Soren Aandahl, founder and chief investment officer of Texas-based Blue Orca Capital. Investors often get the best returns if they enter the market when prices are slightly higher, he said. But now, many of the bubbles in these stocks have been deflated.
But Eirik Hogner, deputy portfolio manager of the Clean Energy Transition Fund, believes that there may be more pain ahead for the electric vehicle industry. He said there are still too many startups that are "underscaled" and have too low gross margins. As a result, the supply and demand dynamics in the electric vehicle market "remain very negative." He said:
“Ultimately, I think we need to see more bankruptcies in electric vehicle companies before the market starts to improve.”
The article is forwarded from: Jinshi Data
