Despite some slight momentum over the past week, Tesla (TSLA) stock remains in the red for the past five days. Even after shares rose today, the struggling company isn’t giving investors more cause for optimism that a turnaround is coming.
That’s partially because CEO Elon Musk still seems focused on everything except his companies. His work with the so-called Department of Government Efficiency is clearly occupying most of his time while Tesla sales decline across Europe and volatility continues to push shares down.
Tesla stock’s recent performance has caused even bullish investors to adjust their takes on it, speculating that the company may be in for more trouble unless Musk takes action into the near future.
Recent data shows that institutional investors aren’t optimistic about Tesla’s growth prospects either. In fact, some seem to be taking the opportunity to protect themselves from future losses and volatility.
Investor sentiment toward Tesla stock is trending downward
Even after the late-week momentum it picked up recently, TSLA has still fallen 30% over the past month, hitting its lowest point in years recently. Given how much it surged in the final months of 2024, this performance illustrates how quickly market tides can shift.
Whenever a prominent stock starts to fall, short sellers take notice and this time seems to be no exception. New data from market research firm Hazletree shows that shortside crowdedness has risen recently. This indicates a few different things, most of which center around a growing lack of investor confidence in Tesla and by default, Musk.
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The most important takeaway from Hazletree’s data, “aggregated and anonymized from approximately 700 asset manager funds,” is that although shares did rise slightly over the past few days, Tesla’s short crowdedness score has risen as well. This suggests that institutional investors are taking steps to profit from downward pressure on the struggling stock.
Tim Smith, the firm’s managing director of data insights provided context on the outlook for Tesla and how investors should evaluate these findings.
“The data paints a picture of an EV stock that’s suffering a metaphorical ‘short-circuit’ — but perhaps the fuse is being replaced,” he speculates. “With ongoing political turmoil and Elon Musk’s personal brand turbulence (e.g., DOGE backlash, protests, arson incidents), Tesla seems stuck between a volatile retail market and a potentially ambivalent institutional positioning.”
Smith also notes that while short crowdedness, a metric that measures the concentration of shorting activity in the stock, has increased for Tesla, current levels are roughly a quarter of what they were about eight months ago.
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The firm notes, though, that “while short interest grows, the long crowdedness score has demonstrated only a slight decrease, despite a slight increase in the share price.” This indicates that investor confidence in the stock isn’t rising, even if share prices are.
Can Tesla stock bounce back from its beaten-down levels?
Tesla isn’t the only prominent tech stock that has attracted interest from short sellers recently. A previous shortside crowdedness report from Hazletree showed the score rising for companies such as Apple (AAPL) , former server technology leader Super Micro Computer, (SMCI) and business intelligence software producer MicroStrategy (MSTR) .
Short interest in TSLA remains lower than for either SMCI or MSTR but higher than short interest for AAPL. Shorting an industry leading company like Tesla may seem fairly risky but Musk’s questionable nature may be making some investors nervous enough to consider it, especially as the threat of tariffs continues to cast doubt over the electric vehicle (EV) industry.
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Noting Musk’s history of odd and controversial behavior, Smith adds that some investors will likely eventually write off his current antics as “another thing that does not impact the actual validity of the company.”
However, other experts aren’t so sure. David Materazzi, CEO of Galileo FX recently spoke to TheStreet about the problems he sees Musk causing for Tesla, particularly in Europe.
“Tesla is in critical condition from what I have witnessed,” he stated. “Nearly a quarter of its sales. When Europe turns on your brand, a lot of the world follows. Lose Europe, lose your edge. Musk built it and now he’s sinking it.”
Materazzi added that in his experience, investors bet on the future. Based on this recent action from short sellers, it would appear that for many investors, the future doesn’t include Tesla retaining its spot at the top of its field.
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