Tesla stock (NASDAQ:TSLA) is closing in on its all-time-highs once more, dealing a sharp, painful blow to the company's short-sellers. With Monday's 6 percent rally as of writing, TSLAQ is feeling the burn once again, and there may very well be more to come.
Tesla shares have had to deal with a lot of headwinds to come to this point. Over the course of the year, TSLA stock fell to over two-year-lows, testing the patience and fortitude of the company's most ardent bulls. During this time, the Tesla news cycle was overflowing with a pervading bearish narrative.
Morgan Stanley analyst Adam Jonas, who is considered as a bull, predicted a $10 worst-case price target for TSLA shares. TSLAQ zoned in for the kill, seemingly thinking that it would only take a little more push before Tesla finally falls for good. Passionate Tesla bears gloated online too, such as Lawrence Meyers, who mocked a prediction from CNBC's Keris Lahiff, which predicted that TSLA stock could rally 90 percent before the end of the year.
As it turned out, Lahiff was indeed wrong on his prediction. But not because he overshot his estimate. Instead, he actually underestimated Tesla's potential. TSLA shares hit $380 per share on Monday's intraday, just a few dollars short of its all-time high of $383 per share and over double the company's price last June. If Tesla maintains this momentum, then a new ATH may be achieved by the end of the week. There's also a chance that TSLA shorts may soon be forced to cover their positions.
According to S3 Partners' Ihor Dusaniwsky, a massive amount of short covering may very well happen if TSLA stock reaches the $390 level since TSLAQ would be down another $1.5 billion in mark-to-market losses. As of December 11, Tesla shorts were already down $1.22 billion in mark-to-market losses, and down $509 million in December.
There are many potential reasons behind the 6 percent rally on Monday. For one, the United States is currently exploring an extension to the federal tax credit given to electric car buyers in the country. If approved, this could lower the price of the Model Y and the Cybertruck by several thousands of dollars. That's enough to cause a disruption to each of the vehicles' segments, particularly as the former competes in the lucrative crossover market, and the latter is aimed at the best-selling pickup truck niche.
Tesla China is also hitting its stride. Earlier today, Made-in-China Model 3 reservation holders who ordered Midnight Silver, White, and Blue vehicles received a notice from the electric car maker about an impending delivery. Hundreds of locally-made Model 3 were also spotted in recent drone flyovers of the Gigafactory 3 site. Great progress is visible in Gigafactory 3's Phase 2 construction as well, as the factory shell of the battery facility is now nearing completion.
But here's the kicker. This is not the "short burn of the century" promised by Elon Musk yet. That will likely happen when TSLA stock breaks the $400 barrier or even higher. For now, TSLAQ shorts are burning, but this is likely only the beginning, especially if Tesla's fourth-quarter results meet the company's own ambitious targets.
TSLA stock is currently trading at $380.94 per share, up 22.55 points or +6.29%.