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How to make money from Tesla? Short it.

January 23, 2025

Is Tesla's bubble deflating?

Tesla's bubble is deflating. Tesla's stock (TSLA) has lost more than 15% in the last month. On December 18, 2024, Tesla reached an all-time intraday high of $488.54. Today, January 23, 2025, Tesla closed at $412.38 per share, which represents a whooping loss of 15.6% in value. This is a decrease of about $160 billion in market capitalization (from $1.45 trillion to $1.29 trillion) in about 35 days for an average loss of about $4.5 billion per day. Chances are that Tesla will continue deflating and losing value because it gained it from air or for nothing. 

Tesla's Stock Bubble: A MAGA Fairy Tale With a Trumped End. 

Tesla's MAGA Fairy Tale Bubble began on October 5, 2024 when Elon Musk made his inaugural appearance at a Trump rally in Butler, Pennsylvania. This was just one month before the election. The location was the site of an unsuccessful assassination attempt on Trump three months prior in July 2024. 

During his speech, Musk emphasized the critical importance of the upcoming election. According to Musk, Trump was the only candidate capable of preserving democracy in America. He urged attendees to actively participate in the electoral process, saying, "Get everyone you know, and everyone you don't know, drag them to register to vote. If they don’t, this will be the last election." 

Musk also highlighted the importance of free speech, crediting Trump with safeguarding this fundamental right. He expressed concerns that the current administration was threatening various constitutional rights, including the First Amendment. Famously or infamously, Musk wore a custom black "Make America Great Again" hat and humorously declared himself "not only MAGA, but Dark MAGA,". 

Elon Musk was the biggest individual donor to the Trump campaign, contributing about $277 million to support Donald Trump's 2024 presidential campaign. Major donations were as follows:

  • Ruth Bader Ginsburg (RBG) Political Action Committee (PAC): In mid-October 2024, Musk donated $20.5 million to RBG PAC, a super PAC focused on abortion. 
  • America PAC: Musk established America PAC, contributing approximately $238 million.
  • In the final weeks of the campaign, Musk made three separate donations of $25 million each, totaling $75 million. 

These contributions were made throughout the 2024 election cycle, with most significant donations occurring between July and December 2024. Musk's financial support positioned him as the largest individual political donor in the 2024 election.

On November 5, 2024, Election Day, Tesla's stock closed at $251.44 per share, marking a 1.6% increase from the previous day's close and the beginning of a bubblicious price inflation for the stock. Between November 5, 2024 (Election Day) and December 18, 2024 (when Tesla's stock reached its all-time intraday high), Tesla shares increased by $237.10, or an incredible 96%. That's right. Tesla, which was arguably already overpriced before the elections, almost doubled in price afterwards just because Musk became a MAGA donor and MAGA Trump supporter. There were absolutely zero fundamental reasons to justify the doubling in price other than political speculation. The theory was (and is) that Trump will make it easier for Musk to keep milking the federal government for subsidies and advantages. 

Reality is sinking in. Tesla has already lost almost 16% and will most likely lose all of the artificial gains since the elections. There are many reasons to be wary about Tesla's future. Below are some examples: 

  • Price Increases: Tesla announced significant price hikes for its vehicles in Canada, effective February 1, 2025. The Model 3 will see increases of up to C$9,000, and the Model Y up to C$4,000. These adjustments coincide with potential 25% tariffs that the U.S. government plans to impose on imports from Canada and Mexico, which could affect the cost of car parts. Investors are concerned that such substantial price increases may dampen demand, especially as the growth rate of electric vehicle sales has recently slowed. In 2024, EV sales in the U.S. rose by about 7%, a notable decline from the 46% growth observed in 2023.
  • Downgrades: BofA Securities analyst John Murphy downgraded Tesla's stock from "Buy" to "Hold," citing high business execution risks related to Tesla's self-driving technology. Despite the downgrade, he increased the price target to $490 based on the idea that fools rush in.
  • Market Volatility: Tesla's stock has experienced fluctuations due to various market factors, including changes in government policies and investor sentiment. 

Easy comes, easy goes. Whatever goes up, comes down. For value investors, the best move is to avoid Tesla at all costs. For speculators, the best move may be short selling or put options. 

Now you know it.

www.creatix.one

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