Elon Musk Takes A Swipe At Analyst’s Short Call On Tesla Stock: ‘So Strong Contra-indicator Then’ – Tesla (NASDAQ:TSLA)

Tesla, Inc.’s (TSLA) strategy amid economic uncertainty has raised concerns among bullish analysts, leading them to turn bearish on the stock. However, CEO Elon Musk remains unfazed by the negative commentary.

On Friday, Bernstein analyst Toni Sacconaghi stated that Tesla is the firm’s best stock idea for shorting, with a 12-month price target of $150, suggesting a nearly 38.5% downside from current levels. Sacconaghi has held a “Sell” rating on Tesla since July 2020.

The analyst based his view on expectations of faltering electric vehicle demand and deeper price cuts, as well as rising competitive pressure from Chinese rivals. Sacconaghi believes that Wall Street analysts will likely lower their near-term delivery and revenue estimates, putting further pressure on the overvalued stock.

However, Tesla investors were quick to defend the company against Sacconaghi’s comments. One Tesla enthusiast pointed out that Sacconaghi has never had a “Buy” rating on the stock since he began covering it in 2016 when it was trading at $16. The supporter also shared a screenshot of a CNBC story from August 2019, which reported on Sacconaghi’s warning that EVs from Jaguar’s iPace and Audi were eating into Tesla’s market share.

In response to the defense, Musk commented, “So strong contra-indicator then.” This suggests that Musk believes Sacconaghi’s consistently bearish stance on Tesla is a sign that the stock will continue to perform well.

The Tesla story has taken a turn for the worse recently, as the company engaged in an aggressive price war that eroded its auto gross margin. The core auto gross margin, excluding regulatory credits, has been trending lower since reaching its peak in the fourth quarter of 2021. In the third quarter of 2023, Tesla reported a core auto gross margin of 16.3%, significantly below the consensus estimate of 18.02%. The company’s failure to comment on the near-term margin trajectory has spooked investors.

Musk has previously indicated that he is willing to sell EVs at zero profit and make up for it with a high-margin recurring revenue stream driven by sales of autonomous driving software. However, Tesla’s Cybertruck, which recently launched, has received mixed reviews, and analysts believe it will contribute only marginally to growth. Additionally, the full-self-driving software, currently in advanced beta-testing, may not be a near-term contributor due to regulatory scrutiny and skepticism among car buyers.

Tesla faces a challenging task as it navigates macroeconomic uncertainty and deals with competitive pressure to break out of its current lackadaisical phase. However, Musk’s confidence and unwavering belief in the company’s long-term success continue to be a driving force for Tesla and its investors.