- "Big Short" trader Danny Moses said that he owns a short position in Tesla.
- Earlier, the trader called Tesla the "king of meme stocks."
- Moses is also bearish on other meme stocks such as GameStop, AMC, and Bed Bath & Beyond.
(Read more from Wall Street Memes: 3 Great Reasons Not to Bet Against GameStop Stock)
Is Tesla the Next "Big Short"?
According to Moses, Tesla represents everything that is wrong with the market. Since mid-June the S&P 500 is up nearly 15%, which is too bullish. The market has ignored disappointing earnings reports, rounds of layoffs, and the fact that wages can't keep up with inflation.
Moses called Tesla "the original meme stock" because its share price does not match its fundamentals:
And after Tesla reported its second-quarter results, Moses called Tesla the "king of meme stocks" again. Moses questioned why Tesla converted its bitcoins to fiat currency and voiced concern that Elon Musk had created a potential liability with his bungled Twitter (TWTR) - Get Twitter Inc. Report takeover.
Moses also pointed out that Musk's company is valued at more than $800 billion but doesn't trade according to its fundamentals and is susceptible to competition and a deteriorating economic landscape. Also, he pointed out that there are multiple government agencies, such as the Securities and Exchange Commission (SEC), investigating Tesla due to operational and non-operational issues.
Finally, there is a group of Wall Street analysts who seem to sweep any Tesla-related problems under the rug.
Moses implied that he has lost a lot of money by betting against Tesla for a long time. But he said that, if and when Tesla ever breaks, he will know that the market has corrected itself.
Is Danny Moses a GME, AMC, and BBBY Bear Too?
Even though he didn't disclose that he has short positions in GameStop (GME) - Get GameStop Corporation Report, AMC Entertainment (AMC) - Get AMC Entertainment Holdings Inc. Class A Report, or Bed Bath & Beyond (BBBY) - Get Bed Bath & Beyond Inc. Report, Moses said that he doesn't think investing in these companies is a healthy move. He prioritizes investing in companies with strong fundamentals and solid balance sheets, not lots of debt.
In early July, Moses commented on GameStop's most recent quarter:
But Moses seems to think that Tesla's case is more worrisome than GameStop's or AMC's. He said that, unlike GameStop and AMC, which show people getting hurt in video games and movies, Tesla has been hurting people in real life.
But here's an interesting fact: Michael J. Burry, who was presented as the main character in The Big Short, was one of the first to "discover" GameStop's perfect short-squeeze setup.
In 2019, Burry bought a sizable position in GameStop after considering the stock's large amount of short interest and realizing that its business was undervalued.
Burry's purchase might have initially helped attract retail investors to GME through social media. As we all know, that led to the insane trading activity of January 2021, when GameStop skyrocketed by about 2,500% in a few weeks.
Burry also revealed that he had a small short trade in Tesla this year but that he had already closed his position.
The Bottom Line
It certainly hasn't been easy to bet against Tesla in recent years. The high trading volume and large rallies that Tesla stock has experienced since 2020 have been similar to the movements of meme stocks.
But there are also several reasons to short Tesla, starting with the fact that the stock trades at super-high multiples. It currently trades at a price-to-earnings ratio of 85 times — 660% above the automotive sector average.
Tesla trades like a growth stock, with its price based on its technology, not necessarily on how many vehicles it sells, like other stocks in the auto industry.
Danny Moses got it right in 2008. And he could get it right again by treating Tesla like a meme stock.
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)