Why Tesla Motors Soared This Week

Since its May 8 earnings report, Tesla Motors (NASDAQ: TSLA  ) has seen its shares soar. Great news had a lot to do with that, of course, but so did another factor: investors who had bet against the stock.

In this video, Fool contributor John Rosevear explains how investors who had sold Tesla's stock short actually contributed to its rise -- and whether the stock's impressive run is likely to continue for a while longer.

Tesla's plan to disrupt the global auto business has yielded spectacular results. But giant competitors are already moving to disrupt Tesla. Will the company be able to fend them off? The Motley Fool answers this question and more in our most in-depth Tesla research available. Get instant access by clicking here now.


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  • Report this Comment On May 20, 2013, at 1:55 AM, SteveTG3 wrote:

    thanks for this and previous Tesla updates John.

    your's is the first report of the short interest falling to 17% I've heard. could you share where you got the data? I'd been looking at Nasdaq.com... only has numbers from the end of April.

    TIA

    Steve

  • Report this Comment On May 20, 2013, at 6:08 AM, TMFMarlowe wrote:

    Steve, I got it via a Bloomberg report late on Wednesday (this video was actually shot on Thursday morning). Looks like Bloomberg got it via Markit:

    http://www.bloomberg.com/news/2013-05-15/squeezed-tesla-bear...

    "About 19.7 million shares were sold short in Tesla as of May 13, or 17 percent of the company’s outstanding stock, according to Markit data. "

    John Rosevear

  • Report this Comment On May 20, 2013, at 8:45 AM, johhnya wrote:

    Elon Musk is going toe to toe with the automakers as well as the oil companies. I salute him and his company for this. His autos are fantastic and I believe the beginning of an electric car revolution in the United States as well as the world. Wall Street has taken notice and bought up his shares accordingly. Also 65% plus are owned by institutions. while other electric start ups flounder, the Tesla S scores accolades.

    Traditional automakers DO NOT want to create or sell electric cars. Why compete against itself?

    Tesla only manufactures Electric Autos. This new way of bypassing dealer networks is masterful as a one price system is very fair. Many a stressed out day I have had negotiating a car.

    My biggest hope is that Tesla can produce a $30,000.00 Auto that will put it in to the middle class purchasing arena. If it can do this and make a profit in that price point, just watch it internal combustion engine! The beginning of the end is near!

    The company is already selling to Mercedes and Toyota.

    This stock may have no limit to its upside.

  • Report this Comment On May 20, 2013, at 8:45 AM, SteveTG3 wrote:

    Thanks for quick reply John.

    I see in the Bloomberg report "shrunk BY 17%" rather than shrunk to 17% (of course, emphasis added by me). This gives a very different read of short interest.

    Seeing how solid, accurate, and balanced everything you've put up here has been, I figured you'd appreciate getting this clarified (though I'd of preferred to email you if I'd seen a way to do that).

    Steve

  • Report this Comment On May 20, 2013, at 9:34 AM, TMFMarlowe wrote:

    Thanks, Steve. This has been, as they say, a fast-moving story. It's totally fine to be hashing out any errors or updates here in comments so that everyone who stops by can get the latest.

    The Bloomberg report says "by 17%" early on, but then there's the quote I included in my reply above, which is the one I was relying on when we shot the video.

    In hindsight we should have confirmed that number for ourselves. I will try to get a clearer and more current update, and I will have a follow-up article for y'all when I do.

    John

  • Report this Comment On May 20, 2013, at 10:03 AM, SteveTG3 wrote:

    John, it is a fast moving story.

    I think the Bloomberg report is consistant within itself. 4 million fewer shares shorted would be a 17% fall from 23.7 million shares to 19.7 million shares.

    What the Bloomberg report is INCONSISTANT with is the way Tesla's short interest has pretty well universally been discussed recently in reporting... that is roughly 40% of Tesla's FLOAT being shorted.

    So apparently 17% of total shares and probably something still in the mid-30 % range of float short as of 5/13.

    Confusingly enough, 19.7 million shares coincidentally represents 17% of total outstanding shares (115.55 million per yahoo finance currently).

  • Report this Comment On May 20, 2013, at 10:19 AM, TMFMarlowe wrote:

    @johnnya: I think the big global automakers will be quite happy to make electric cars once they're satisfied that there is a big enough market for them and sufficient infrastructure in place.

    I say this over and over: Tesla has done a fantastic job, and the car is wonderful, but I firmly believe that people who look at it from a high-growth-tech-stock perspective (instead of an auto-industry perspective, like mine) greatly underestimate the competitive threat.

    Already, Ford and Toyota are making plug-in hybrids with technology similar to Tesla's; including a gas-powered "range extender" is simply a way to hedge their bets on (the lack of) infrastructure for the time being.

    Audi/VW, BMW, Cadillac/GM, Honda... any of them could do a serious and credible Model S rival if they felt there was a big enough market for it. If Tesla's success continues, and demonstrates that there is in fact a big market here... they'll enter it.

    Musk himself will probably be pleased, on balance -- he will have driven a big social change! -- but Tesla investors betting on uninhibited hockey-stick sales growth and talking about "moats" might be less pleased.

    We shall see.

    John Rosevear

  • Report this Comment On May 20, 2013, at 10:26 AM, TMFMarlowe wrote:

    Steve, I think your interpretation is right. There were a bunch of reports flying around last week, and we grabbed the wrong one to run with.

    Clearly, we need some solid, updated data.

    I work remotely, so I don't have direct access to all of the proprietary data feeds that Fool HQ gets. I've asked an analyst at headquarters to try to get some up-to-date numbers for me. I'll post here and/or do a follow-up article with whatever he turns up.

    Thanks,

    John

  • Report this Comment On May 20, 2013, at 11:38 AM, SteveTG3 wrote:

    Okay John, glad you guys are on it.

    fwiw, on competition: I don't take for granted Tesla will always have a competitive edge, but currently they do, and I'd expect it to last at least 2-3 years given the nature of the auto industry development process. Just look at the range they get out of X kWh for the weight of their car compared to existing competition, and what's on the horizon (i.e. BMW's coming I3).

    Interviews with JB Straubel and Musk help to understand this is not simply a matter of buying enough laptop cells... it's the complexity of putting them together as a compelling driving experience in a way that is safe, lasting, consistant, balanced through the pack, capable of handling a wide array of temperatures and conditions potholes, rocks kicking up, etc. This was an engineering task Tesla spent a great deal of time and I've heard both Strauble and Musk refer to as their competitive lead (if you like I can try to dig up articles where they discussed this).

    I'm under no illusion that technology can shift and Tesla could end up in a tough spot, but the idea that automakers can simply throw money into this and catch up, well, almost as off the mark as predicting Smith Carona would dump some cash into R&D to dominate the laser printer business (I think very few people have really thought through how little expertise in an ICE drivetrain transfers to an EV drivetrain).

  • Report this Comment On May 20, 2013, at 11:55 AM, SteveTG3 wrote:

    (last paragraph should read, "I'm under no illusion that technology CAN'T shift...)

  • Report this Comment On May 20, 2013, at 12:15 PM, TMFMarlowe wrote:

    Straubel and Tesla definitely have some special sauce when it comes to putting together and managing the battery packs.

    But the more forward-thinking automakers (Ford is one) are already doing vehicles that suggest they're working hard to climb that particular learning curve. Ford's plug-in hybrids use the same Panasonic batteries that Tesla is using, with Ford's own software. I'm sure that somewhere deep in a Dearborn lab (and probably in other labs) there's a Model S that has been taken apart and thoroughly analyzed as a benchmark. That's how it goes in the auto business.

    It's not just "throwing money", it's that companies like Ford and VW et al have access to immense resources that Tesla doesn't. And I think many of Tesla's supposed advantages have been way overstated.

    But the biggest thing is this: When it comes to competing in a global way in the auto business, scale matters -- a lot. Tesla doesn't have much yet.

    To be clear, I don't currently think that Tesla is going to fail. They've executed way too well. I just don't see how they're going to get the growth that's baked into their stock price without having to face some very big competition. And I think that some Tesla investors have way, way underestimated that competition, so I will keep encouraging the discussion. As always, thanks for being part of it.

    John Rosevear

  • Report this Comment On May 20, 2013, at 12:28 PM, SteveTG3 wrote:

    It is fun to watch, and I agree complacency here is not a good idea. funny, and very very likely some Model S's are being torn apart at various existing automaker's labs.

    I do think Tesla has an opening if they get Gen III out in 3-4 years as they say they will. I think it is highly unlikely Tesla's perception as the top brand in the space will be overtaken by then. Again at earliest, I see a major existing manufacturer with a car with specs competitive to Tesla in 3 years, but without Tesla's track record. So I think consumers will definitely be open to Gen III, it's up to Tesla to execute and deliver a winning mass market product while they have this window.

    (fwiw, while the engineers at Ford, etc., rip open and pour over the Model S' powertrain, their legal staff has to pour over Tesla's IP estate.)

  • Report this Comment On May 20, 2013, at 9:21 PM, Jackl1956 wrote:

    People do not buy what you do. They buy WHY you do it.

    http://www.ted.com/talks/simon_sinek_how_great_leaders_inspi...

    Elon Musk believes in what he is doing. He believes that it is the right thing to do. Tesla customers' believe what Elon believes.

  • Report this Comment On May 21, 2013, at 8:20 AM, TMFMarlowe wrote:

    @Jackl1956: In the auto business, product wins. Period. Not touchy-feely corporate messaging or rock-star CEO behavior. Product. Period.

    Tesla's doing well because the Model S is a great car. Period. If it wasn't, things would be different.

    Rule number one of investing in an automaker (even a tech-darling automaker like Tesla): Product is THE most important thing.

    Thanks for reading.

    John Rosevear

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