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Are Short Sellers About To Get Burned By Tesla (Nasdaq: TSLA) Stock
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Recovering quickly from Monday’s sudden selloff, investors are driving a strong rebound in stock prices across markets on Tuesday. As of 1:30 p.m. ET, the S&P 500 is up a strong 1.8% and the tech heavy Nasdaq an even stronger 2.2%, suggesting positive momentum is carrying the day.
And if you’re short Tesla (Nasdaq: TSLA) stock, that might be bad news.
Key Points
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Tesla will report Q1 earnings after the closing bell Tuesday.
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Options traders are split on whether the stock will do well or not, but bulls currently outnumber bears, and the broader stock market seems ebullient.
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At 100 times earnings, Tesla stock is expensive. But it’s still risky to short it.
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As I type these words, options action on Tesla is running right down the middle, with bears almost balanced against bulls. And yet, there’s a slight bullish tilt, as call buyers outnumber put buyers roughly 10-to-9 in midday trading. This suggests hidden optimism about Tesla’s results, which are due out right after the closing bell at 4 p.m.
Tesla faces a low bar for success
The news gets even worse, if you’re short Tesla, because the company has already reported weak deliveries for Q1 2025, and expectations for earnings are muted. Consensus forecasts have the electric car company reporting only $21.5 billion in Q1 revenue, and adjusted profits of no more than $0.44 per share.
Relative to last year’s Q1, this means Tesla only has to show 1% total revenue growth year over year to meet expectations. Anything better than that would be a “sales beat.”
Earnings are harder to parse. We know what Tesla actually reported as GAAP income last year, $0.37 per share, which suggests that a move to “$0.44” would be both significant and difficult to achieve. However, we don’t know what analysts calculated for Tesla’s “adjusted” earnings a year ago, making it more difficult to say if a move to $0.44 would be an “adjusted” improvement or not.
That very uncertainty, however, may make it easier for Tesla bulls to argue their company actually performed well in Q1, especially if the company clears the not-very-high sales hurdle.
Mind you, none of the above means Tesla stock is necessarily a “buy.” Indeed, priced at a rich 100 times earnings, Tesla might very well be a stock that’s too expensive to be worth buying. But it does suggest that there’s significant risk to shorting Tesla stock in these few hours remaining before earnings.
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