Editor's Note: Shares of Tesla (TSLA) are down -10% since Hedgeye analyst Jay Van Sciver made his big “Best Idea” SHORT call one month ago on June 9th, versus +0.5% for the S&P 500. He thinks the worst is yet to come for the stock.
Short Tesla? Here Are 9 Reasons...
(This is a taste via Hedgeye Industrials analyst Jay Van Sciver's granular, deep dive 60+ page Black Book. For full access email firstname.lastname@example.org)
- To be clear, Tesla is a temporarily subsidized maker of capital goods.
- We are expecting under-performance as Tesla's exciting concepts transition to mundane execution.
- Established equipment markets have seen almost no competitive entry for decades; important structural hurdles typically preclude entry into markets like automobiles and electrical equipment. As Tesla's tax credits are exhausted, existing car makers can introduce EV models with as yet unused tax credits, adding to their already substantial edge.
- Concepts, ideas, and vision can easily win the market's beauty pageant. Grinding out a cheap version of a high-end platform in a competitive market, with a less tolerant customer and expiring tax credits? That gets ugly.
- The goal in a story stock like Tesla is to anticipate the next chapter.
- Tesla's valuation is silly, and we suspect most sophisticated investors realize it.
- All this drama comes just ahead of new competition that may permanently degrade Tesla's growth prospects.
- Longs should be fearful and shorts greedy, as we see it.
- If Tesla even survives to profitability, it would be an exceptional accomplishment.
Did you know? A ‘Competitive Nightmare’ Lies Ahead for Tesla
Remember the Volkswagen emissions scandal? More popularly known as “dieselgate”? In 2015, it was discovered that Volkswagen intentionally programmed diesel engine cars to temporarily pass U.S. emission standards, only to later emit 40 times the legal limit on air pollutants.
“Dieselgate is a complete disaster for the auto industry,” says Van Sciver. More specifically, it’s a “competitive nightmare” for Tesla, he says.
Here’s a look at why in the video below.
We See A ‘Big Red Flag’ Looming for Tesla Investors
Calling the end of the “Tesla bubble” has left a lot of famous investors bruised and beaten.
But there’s reason for pause now. “Orders are going the wrong way for a stock priced for exponential growth,” says Hedgeye Industrials analyst Jay Van Sciver in a recent short Tesla institutional research call. “They need to get more volume to get competitive and that demand just isn’t there.”
Watch the video below for more.
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