With a stock market saturated with high-priced darlings, finding companies to bet against is really not that difficult of a task currently. The equity of some companies are more overpriced than others, and finding those which have been priced in an "irrational" way by an investor base which are more akin to zombie-groupies than true fundamental long-term investors is the goal of many looking to take short positions in this current market.
Companies such as Tesla Inc. (NASDAQ: TSLA) certainly fit the bill as a company with a cult-like following and a very unstable balance sheet, making its meteoric rise appear to be that much more tenuous for those interested in "buying the recent dip."
Tesla’s share price is down approximately 28% from its 52-week high, and has been on a downward trajectory in recent months as many retail investors begin to heed the warnings of institutional investors and analysts covering Tesla who have begun to beat the drum on specific concerns which are likely to impact Tesla’s share price in the near to medium term.
The primary concern many investment houses have with Tesla’s equity is the fact that the company’s balance sheet provides only enough cash to cover the company’s operations for the next few months. Estimates are that Tesla could run out of money by mid-2018, meaning the firm will likely need to raise equity or debt, face a possible downgrade by ratings firms, and will face a scenario where “growing out of the hole” the company finds itself in to be an increasingly difficult endeavor.
I encourage investors willing to hold onto a long-term short to consider Tesla, as I believe this company has at least as much downside as JPMorgan hinted at in December (-40%) at this point in time.
Invest wisely, my friends.
