Financial analyst Dan Niles, co-founder and portfolio manager of the Satori Fund, has made it clear that he continues to hold a short position on Tesla’s stock. Despite his bullish outlook on the broader market, Niles sees significant challenges ahead for Tesla that could lead to a decline in its stock value. In this article, we will explore Niles’ concerns and discuss the factors that contribute to his skepticism.
Niles believes that Tesla now faces a very different market environment compared to earlier this year when its stock value had doubled. One of the key factors affecting the company’s outlook is the surge in interest rates. The 10-year Treasury yield recently reached 4.8%, which has created a challenging backdrop for auto sales. Higher interest rates have resulted in an increase in the average new-vehicle loan interest rate to 9.62%, according to Cox Automotive. As a result, it now takes 42.1 weeks of median income to purchase a new car, up from an average of 34 weeks before the pandemic.
The rising financing costs of vehicles for the average consumer, combined with the significant increase in Tesla’s stock value, have led Niles to believe that the company is a good candidate for a short position. He highlights that this positioning should be considered relative to other technology stocks that he holds long positions on. Niles points out that Tesla delivered 435,059 cars in the third quarter, below expectations and lower than the previous quarter’s 466,140 cars. Despite earlier price cuts on its Model 3 and Model Y vehicles, the company continues to target its goal of 1.8 million vehicle deliveries for the entire year. However, Niles views these lower delivery numbers as an indication of continued pressure on gross margins for the company’s future.
It is worth noting that Niles’ short position on Tesla is relatively small, accounting for only about 1% of his portfolio. Previous aggressive bets by the fund manager have reached up to 15% of the fund’s value for stocks that the hedge fund has had a high conviction on. Despite his skepticism about Tesla’s stock valuation, Niles expresses positive views on the company itself. He personally owns a Tesla Model X and believes that the company has created a great product. Niles even goes as far as comparing Elon Musk, the CEO of Tesla, to the legendary inventor Thomas Edison. However, Niles maintains that the stock is expensive, especially considering the likelihood of lower estimates.
While Niles is skeptical of Tesla’s stock, he remains optimistic about the broader market. Currently, less than 10% of his fund’s holdings are shorts, a significant deviation from the historical average of around 50%. This suggests that Niles has a bullish outlook for the overall market, even though he remains cautious about specific stocks like Tesla.
Dan Niles, a hedge fund manager and financial analyst, continues to hold a short position on Tesla’s stock despite being bullish on the broader market. He sees significant challenges for the company, particularly in light of surging interest rates and lower-than-expected delivery numbers. While Niles has a positive view of Tesla as a company, he considers the stock to be overvalued and believes that there may be lower estimates in the near future. Regardless, Niles’ skepticism does not extend to the overall market, as he remains mostly bullish on his fund’s holdings.
Leave a Reply