Our “short of the year” call, which we initiated on June 17th of 2015 at US$260.41 (https://l2capital.com.br/pt/tesla-o-short-do-ano/) is paying off big time. The shares are currently trading at around US$200, yielding over 20% for our clients portfolios so far. We still find them to be overvalued and maintain our short position.
Tesla owes more than US$3.3B, which are being paid at the lowest interest rates in history. Can one imagine what is going to happen to a company that generates no cash, shows no profits, sells very few cars (and still had to recall some of them), when the interest rates are raised? We asked that question on June 17th and we are getting our answer now: the shares are melting down!
We do admire Tesla`s CEO, Elon Musk, but we believe the company is priced to perfection, which hardly ever happens.
Of course, Morgan Stanley (MS), one of the banks in charge of the Tesla’s follow-on last year, released a report raising its target price by nearly 100% a week after the follow-on. According to MS, the price objective was US$465!!! Wow!!! One can´t be more neutral and impartial than that!
That doesn´t remind us of the 1990’s at all, when MS and other banks, which were underwriters of companies with no future in the stock market (IPOs), were also releasing very bullish reports, recommending the very same companies they were assisting and tagging price targets way over the stratosphere.
More bullish analysis reports must be underway, since we believe Tesla isn´t going to hold on for another two quarters without an additional follow-on. Nevertheless, we are going to stick to our long-term prediction on Tesla, at least as far as the share prices are concerned.