I don't write about the stock market here, usually, because I don't understand it and I'm suspicious of anyone who claims they do. But I've been staring at Tesla's share price for about a week now and I need to talk about it somewhere, and this blog has always been the place where I think out loud, so here we are.
Tesla reported Q4 earnings Wednesday after the bell, and it turned out to be an actual profit, the second quarter in a row, which apparently nobody who bets money for a living thought was going to happen twice. The stock jumped something like 14% the next day. Then it kept going. By Friday's close it had blown well past $600 a share, which is bananas when you remember this was a stock trading in the $180s back in June. Not even a full year ago. That's not a typo, that's just what happened.
Somewhere in the middle of all this — I think it was the Wednesday before earnings even came out — Tesla's market cap crossed $100 billion and briefly made it worth more than Ford and GM combined. Two companies that, correct me if I'm wrong, still sell vastly more cars and have been profitable for, you know, decades. I'm not saying the market is wrong exactly. I'm saying I don't get it, and I've stopped pretending I do.
The short sellers are having a very bad month
The part of this story I actually find interesting isn't Elon Musk or the Model Y ramp or any of the stuff Tesla actually makes. It's watching a huge pile of institutional money that bet against this stock get absolutely mangled in real time. Tesla has been one of the most heavily shorted stocks on the entire market for years, on the theory that the company burns cash, can't hit its own delivery targets, and is one bad quarter away from a real crisis. That thesis wasn't crazy! It just happened to be wrong at exactly the moment it mattered, and now a bunch of very smart, very well paid people are sitting on losses that reportedly run into the billions collectively. There's something almost funny about it, in a bleak way, like watching someone confidently walk into a glass door.
I'll admit a small personal bias here: I've never owned Tesla stock, mostly because a coworker tried to talk me into buying some around $250 back in 2018 and I said no because "the fundamentals don't support it," and I have regretted that sentence roughly weekly ever since. So take my skepticism with whatever grain of salt that requires. I am, demonstrably, not the guy to ask about when a stock is expensive.
What I keep coming back to is how untethered the price action feels from anything happening at the actual factories. Deliveries were up, sure, guidance was decent, sure. But a 14% single-day pop plus a run that's more than tripled the share price since last summer isn't really pricing in "slightly better than expected sedan sales." It's pricing in something closer to Tesla being the only company that matters in an industry that's about to be completely remade, forever, starting now. Maybe that's true! Ten years from now I might read this post back and feel embarrassed. It's happened before. But I was around for the Nikola-hype-cycle version of this feeling with a few other names over the years, and it rarely ends with everyone just quietly being right.
None of this changes anything about my actual life, obviously. I still drive a 2014 Civic with 91,000 miles on it and no plans to change that until something breaks. But it's a strange thing to watch play out on a chart, this fast, in the same week I was also reading headlines about a new virus spreading out of Wuhan that at the time felt like a story from very far away. Funny how a random Friday in January can have two completely unrelated things happening that both feel, in hindsight, like the start of something. One of them I understand even less than the stock chart.
Anyway. If you shorted Tesla, I'm sorry, truly. If you bought in June, congratulations, and also please never tell me about it in person.