Tesla Motors Inc (NASDAQ:TSLA) continues its sharp rise today, setting a new record of $54.97 per share before retreating slightly. The last record high was Friday at $52.92 per share. We’ve been looking for a short squeeze for the last week or so as the stock has risen even though numerous investors have bet against it.
Recently, analysts at Longboard Asset Management published their thesis on why Tesla Motors Inc (NASDAQ:TSLA) will continue rising. They believe Tesla common stock will hit $100 per share within 18 months and $200 per share within the next five years.
Right now the EV market is very polarizing. According to Longboard, 44 percent of the free trading float is short on Tesla right now because they view the company as another Solyndra and believe that it’s heading for failure.
But short sellers are likely missing several things. Tesla Motors Inc (NASDAQ:TSLA) holds a dominant share of the EV market right now. Also the Tesla brand has multi-billion dollar equity, and there’s an extremely high global consumer demand for the company’s Model S vehicle.
In their view, the Tesla brand has become just as respected by consumers as Apple Inc. (NASDAQ:AAPL)’s brand. They point to how the 2007 release of the iPhone “disrupted the mobile phone industry and led to an 80% market share of the new smartphone market created by Apple.” Longboard believes that in a similar way, the Model S has disrupted the performance vehicle industry, and they’re predicting that Tesla will come out with an 80 percent market share of the new market, just like Apple did with its new market.
Longboard analysts also believe that the company’s sales and market strategy are brilliant and that the company’s management leadership is very skilled. After all, Tesla Motors Inc (NASDAQ:TSLA) CEO Elon Musk also heads up SpaceX where they build and launch private rockets.
In addition, former Apple executive George Blankenship took his branding expertise to Tesla. He has been building branded consumer experience stores around the globe as the company sells its vehicles directly to consumers—much to the chagrin of auto dealers in the U.S.
In Longboard’s view, the combination of several factors will push shares of Tesla Motors Inc (NASDAQ:TSLA) much higher. They believe Wall Street is “drastically underestimating the probability and magnitude of Tesla’s success.” Also the fact that such a high percentage of the market is short on Tesla Motors Inc (NASDAQ:TSLA) could lead to an upside correction because Tesla shares are very tightly held and increasingly in demand. They also point out that new owners of the Model S are very wealthy and will likely buy shares of the company, creating even more share scarcity.
“Short sellers are trapped in a wrong way bet with a stock making new all-time highs,” the analysts wrote. “The increasing difficulty of finding shares to hold their short position combined with the acute pressure of mounting financial losses will force the shorts to cover into a run up in price.”
Musk himself also had something to say to short sellers recently. He said it’s not a good idea to bet against his company.
“The shorts are in it to the hills,” Musk said. “I think it is very unwise to be shorting Tesla. There is a tsunami of hurt coming for the short.”
Slideshare link: Will Tesla Shorts Get Squeezed to $200?