There have been a lot of bears on the tail of Tesla (NASDAQ:TSLA | TSLA Price Prediction) in the past several years, but the name has proven quite punishing to short. Now that Dr. Michael Burry of The Big Short fame doesn’t have to answer to any investors (he’s moved on from Scion), it feels like the man is now able to place bearish bets against companies that he fundamentally believes are at risk of a tumble or even a crash.
Of course, Dr. Burry is a brilliant man who made one of the best trades of all-time in the face of the housing meltdown of 2008. But like so many other investment greats, his batting average is not perfect and, on occasion, he’ll strike out. In any case, I do think the man has a strong case for placing bearish bets against Tesla at north of $416 per share.
Tesla shares are picking up traction. But standing in front of a potential breakout is risky
The recent spike in the release of its Full Self-Driving (FSD) v14 Lite release, I think, might be a tad overdone. At the end of the day, Tesla still has a lot to prove as Optimus, the Terafab, and its custom silicon look to hit the spot. At these heightened valuations, there is certainly no room for error. But, then again, it’s Tesla and Elon Musk we’re talking about.
Fans of the firm and Mr. Musk are among the most patient of investors in the world. Call them diamond hands, if you will, but they’re willing to stick around for the long run as they buy into Mr. Musk’s long-term vision of the future.
Could it be that Mr. Musk’s exceptional stewardship is worth more than 300 times trailing price-to-earnings (P/E), as he splits his time across Tesla and Space Exploration Technologies (NASDAQ:SPCX)?
As always, time will tell. Maybe one day Tesla and SpaceX will merge into one — a move that I think would make the most sense, given robots, AI, chips, orbital data centers, and lunar production all seem to fit into the same basket.
Why I wouldn’t follow Dr. Burry’s new big short
While Dr. Burry’s latest Tesla short should have investors asking questions about what could go wrong as the price of admission starts to swell again, I still think that Dr. Burry’s moves and words should not be taken as any form of gospel.
Despite its lofty valuation, Tesla has and will probably continue to be tough to short. That is, unless some of the big, ambitious projects that lie ahead run into a few hurdles. The company is taking a huge risk to get a better seat in the physical AI race.
But, then again, high risk tends to accompany high reward, and if there’s a man who’s shown he can execute, it’s Elon Musk. Though, he’s known to be quite aggressive with the timing. As AI moves down an exponential curve, rather than a linear one, though, maybe Mr. Musk will be right to move with such aggression, as he turns his vision, deep pockets, and speed of execution into a tremendous first-mover’s advantage.
When it comes to AI and robotics, much of the spoils are bound to go to the firms that are willing to take risks, move fast, and shoot high. In that regard, I’d be pretty hesitant to follow anyone into a short position on shares of Tesla.
The bottom line
Still, at these valuations, I think it’s not hard to dismiss the bear-case scenario, especially if interest rates are destined to go higher from here, and if delays hit Cybercab, Optimus, or EV sales.
Add dilution into the equation, and it certainly feels like Dr. Burry might just get the timing right with his new short position. Personally, I wouldn’t go long or short in a name that’s a fierce tug of war between the bulls and the bears.
Contact [email protected] for any questions or corrections.
Top Gaining Stocks
Top Losing Stocks