3 Reasons Tesla Could Short Squeeze Past $100

TheStreet.com

NEW YORK (TheStreet) -- Tesla Motors' share price is being driven up by company financial performance, a strong product and shorting by traders. Recognizing the influence of these three factors allows investors to refine their trading strategy for this stock.

Tesla reached the $87 on Monday with its market cap soaring into the $8 billion dollar plus range.

TSLA Chart
TSLA data by YCharts

The first reason: The stock beat earnings. First-quarter net income totaled $11.2 million from a loss of $89.9 million a year earlier, Palo Alto, Calif.-based Tesla (TSLA) said. The profit was 12 cents a share, compared with a year-ago loss of 76 cents a share.

This kind of fundamental performance can drive a share price extremely high. In order to sustain this kind of growth there needs to be a continuation into the next quarter with a huge successive jump in earnings.

If this happens, the stock could double, triple and even quadruple. As long as the company is beating earnings, increasing sales and returning a profit to the shareholder, the stock will soar.


The second reason: The company is selling a ton of its cars because of the great design of the vehicles. If Tesla creates a car that people look at, if they fall in love with the design, and just HAVE TO HAVE it, then they will buy it. Remember the Apple iPod taking off because of great design. If you read Dan Pink's book, 'A Whole New Mind,' you'll find he talks about the shift in our society for the necessity for great design instead of just another product. In this case it's a sexy, electric, fast sedan that everyone has to have.

The third reason: The stock is soaring and could see $100 soon is because of the amount of shorts in the stock. The more traders that bet against it, the more will have to cover their position to close out their loss and this will drive the stock higher. As of today the stock has a 44% short interest according to Yahoo Finance.


Tesla overall is going up: that is what the data tell us for now. Until it stops going up I wouldn't bet against this stock. Beware also of chasing the stock.

At the time of publication the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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