Short interest data can be a powerful tool. Not only can it help investors identify risky stocks but it can also help investors identify stocks with improving fundamentals.
In this report, we are going to analyze the short interest data on Tesla Inc (TSLA:US). Tesla is an American automotive and renewable energy company. Led by Elon Musk, it is the world’s most valuable automaker. It is listed on the Nasdaq and currently has a market capitalization of approximately $564.13 billion.
Tesla Short Interest
Our short selling data shows that Tesla’s short interest is quite low at present. Currently, 21.66 million TSLA are on loan, representing just 0.81% of the free float. The utilization rate (a measure of demand on the short side) is just 1.17% while cost to borrow is low at 0.46% These figures indicate that institutions are not targeting the stock aggressively at the moment.
To put Tesla’s short interest figure in perspective, rivals Rivian Automotive and Lucid Group currently have short interest of 8.43% and 38.05% respectively. So, Tesla has a much lower short interest than some of its electric vehicle (EV) peers.
Short Interest Is Falling
It’s worth noting that Tesla’s short interest did increase in October. On October 24, the number of shares on loan hit 40.59 million. However, since then, the number of shares on loan has declined by nearly 50%. This suggests that the outlook for Tesla stock – which has fallen more than 50% in 2022 – could be improving.
Share Price Drop
As for why the short sellers have backed away from Tesla recently, it is most likely related to the significant drop in the share price.
Back in late October, Tesla’s share price was near $230. However, this month, it has been below $170 at times. This fall has changed the risk/reward skew for the short sellers dramatically.
After the recent drop, Tesla shares don’t look that expensive. With Wall Street expecting the company to generate earnings per share of $5.64 in 2023, the forward-looking P/E ratio is now in the low 30s.
At that valuation, the stock could see interest from investors. It’s worth noting that analysts at Citi just upgraded the stock to ‘neutral’ from ‘sell’, stating that the 50%+ slump this year “has balanced out the near-term risk/reward.”
Going forward, we will continue to monitor Tesla’s short interest. However, for now, it appears that short sellers are not very interested in the stock.