Tesla shorts down $1.25 billion in mark-to-market losses

In the same way as the second half of 2019, 2020 was a great year for Tesla's bulls, but sad and devastating for short sellers of the company's shares.

Traders who have bet against the Tesla are down as much as $1.25 billion in mark-to-market losses after Monday, according to data from financial-analytics firm S3 Partners. On Monday, Tesla broke above $500 per share for the first time ever and continued to gain, ending the day up early 10% at $524.86 per share.

Source: S3

"With 2020 losses mounting, we should see a continuation and probably an acceleration of Tesla's multi-month short squeeze," Ihor Dusaniwsky, the managing director of predictive analytics at S3, wrote in a Monday note. "Those with lower profit and loss pain thresholds will likely be the first to cover, or exit the short trade," he added.

Traders shorting Tesla didn't have a profitable 2019, and were down roughly $2.9 billion in mark-to-market losses for the year, according to S3 data. This year isn't going much better for Tesla shorts. Dusaniwsky wrote: 

"In less than two weeks, they’ve nearly matched last year’s losses, down -$2.80 billion in net-of-financing mark-to-market losses, including -$1.25 billion in losses on today’s +9.77% price move."

Tesla's stock gains have been recently fueled by solid 2019 vehicle delivery numbers and optimism around the new Gigafactory in Shanghai. In addition, a number of Wall Street analysts have boosted their target prices for Tesla. 

Argus Research analyst Bill Selesky raised his 12-month price target on Tesla to $556 from $396. Such an increase in prices, Selesky justified by the fact that Tesla achieved record production and supply of cars in the 4th quarter of 2019. The total supply in 2019 amounted to 367,500, and was 50% higher than in 2018.

Yesterday, Oppenheimer analyst Colin Rush raised Tesla's target stock price from $385 per share to $612 per share. He claims the company has reached a “critical scale” to support sustainable free cash flows. He also suggests that a company could also pose an “existential threat” to transport companies that have no ambition or ability to innovate at the fast pace of Tesla. Analyst believes Tesla has "key advantages" over its competitors in powertrain design and battery technology, ADAS fleet size, roadmap to energy independence and consumer enthusiasm. 

Jefferies analyst Philippe Houchois raised his price target for Tesla to $600 from $400 and keeps a Buy rating on the shares. Tesla is the only car manufacturer engaged in a "positive-sum game" in electric vehicles amid rising market acceptance, and its auto business should turn profitable this year excluding tax credits, contends the analyst. Further, Houchois believes the company "balance sheet de-risking makes old and new growth opportunities viable, from battery tech to stationary and autonomy." The analyst, who boosted his price target after incorporating the company non-auto valuation drivers, also thinks consensus estimates for 2020 look "reasonable and conservative."

Even though Tesla is one of the most popular shorts —second only to Apple in the domestic market, according to S3 data— it's been a rough one for traders. Since 2016, when S3 started calculating short side data, Tesla shorts are down about $11.44 billion in net-of-financing mark-to-market losses, Dusaniwsky wrote.

TSLA short interest is $12.79 billion; 26.74 million shares shorted; 19.99% of its float; and a 0.30% stock borrow fee. TSLA is the second largest short in the domestic market behind Apple Inc (APPL).

Source: S3

"The recent rally may be the final tipping point for the mother of all short squeezes," Dusaniwsky said. "If shorts begin to cover in size, we expect the Tesla rally to get turbo charged to even higher levels."