Tesla Motors Inc is likely to face stronger headwinds going forward as one of its most vocal bears throws another punch at the stock. In recent news interviews, Jim Chanos, a longtime Tesla Motors bear, has been shedding more light on why he is shorting Tesla stock despite the fact that he thinks that the firm has a great product in its electric cars.
In the last year, shares of Tesla Motors have dropped 9% and the percent of float short has increased by 9.18% — the percent float short is 26.50% in the most recent report form NASDAQ.
The news about Jim Chanos shorting of the EV maker confirms the news from yesterday that analysts are not happy to take a ride on Tesla Motors. On Monday, more insights emerged on the bearish case for Tesla despite the fact that Elon Musk has tried to revive positive interest by releasing new autopilot features. The shares of have been facing downward pressure in the last couple of weeks, the shares of Tesla are already down 11.1% after the firm unveiled its Model X on Sept 29.
Here’s why Chanos won’t buy a Tesla
Jim Chanos is the founder and president of Kynikos Associates, he loves shorting firms involved with Elon Musk. Jim Chanos seems to be anti-Musk because when he is not shorting Tesla Motors, he is shorting SolarCity.
He thinks that Tesla is overpriced at its current share price above $200. He says that Tesla is still a tech startup that sells about the same number of cars globally as its rivals sells in the U.S. alone in a quarter.
In his words, “In order to sell millions of cars, which is where the stock is valued, the stock is priced as if they’re going to completely succeed in being a major car manufacturer. They’ve got a long way to go”. In essence, he thinks that the stock is valued as if it is already selling millions of cars when it is clearly miles away from selling hundred thousand cars.
He also thinks that Tesla Motors is not growing as fast as it needs to grow before rivals with deeper pockets start to scramble EV market. Chanos says, “I think Tesla’s got a great product, but Tesla’s got to navigate from being basically a small, boutique, elite car manufacturer to a mass market automobile manufacturer. That’s a very, very difficult thing.” Chanos words echoes the fears of analysts at Barclays who think that the firm doesn’t have what it takes to become the next Ford.
Jim Chanos might be wrong on Tesla
Matterw DeBord of Business Insider thinks that Jim Chanos might be wrong in calling Tesla Motors an overprice carmaker. Matthew noted that Chanos’ thesis is wrong to have compared Tesla’s sales number with sales number from BMW because both firms operate in separate markets.
To start with, Tesla Motors only makes pure EV vehicles with enough range that is on par with offerings with cars running on ICE. In contrast, BMW makes plug-in gas-electric hybrids while its pure EVs won’t make it from one supercharger to the next on the freeway. However, the fact remains that Tesla Motors still has a long way to go before it can throw the bears off its scent.