I keep saying and saying it, but the only the ones pushing around the price of Tesla’s on a daily basis are the short-sellers, and today they got there faces ripped off. With the stock up by over 16 percent, as they scramble to cover. As of July 13, nearly 30 percent of the float was short, that is 34.7 million shares. One needs to remember that about 60 percent of the stock is owned up among just the top 6 or 7 holders, then add to that all the index funds that own it, and some of the smaller funds that hold, and there very few shares trading on a daily basis usually coming from natural sellers, in my opinion.
The bad news for the shorts is only 23 million shares traded on the day, and let’s assume aggressively 50 percent of the volume was short sellers just covering, that means 13 million shares cover, roughly 1/3 of the total number of shares short. By the way, 50 percent of the volume is highly unlikely based on my days being a trader; I’d bet it was closer to 25 to 33 percent.
So the bad news is that the stock is likely not finished going higher over the short-term.
I don’t think anything came out of the Tesla results that suddenly changed, in fact if you had listened to the company, it was pretty clear that is not going to raise capital. Also, as we have noted on this blog several times, the evidence for production was around 5,000 Model 3’s per week.
I was on vacation the past four days, but I still managed to break away to listen to the Tesla call for 30 minutes. Even I had no idea the company was building its own chips. At that moment I connected the dots why Tesla ditched Nvidia a year or so ago. The person now leading the team to make these new chipsets happened to work on the design for Apple in older iPhone models. It in a way verified to me that Tesla is much more than just a car company, as I have said for some time, but it is a technology company disguised as a car company.
When asked on the call, who Elon viewed as his biggest competitor Amazon or BMW, he was somewhat stunned as if he wanted to say neither, and he pretty much did.
$388 is the breakout point, and if it rises above that price, the stock has a shot of $100 billion market cap, yes really.
Apple did break out today, but I need to do some work on where it goes. But there is no reason this stock can’t trade with an 18-20 one-year forward earnings multiple for 2020, especially if services continue to ramp-up. That would put it between $270 and $300, about.
To this point $332 has held nicely for Netflix, and rise back to $357 seems in order.
Chips stock look like they may getting ready to break out soon too.
The S&P 500 continues to hold support at 2,794, and again I still think we go higher, nothing has changed to suggest otherwise at this point.
That is it, don’t forget tomorrow’s Jobs Friday – Woo-Hoo!