Chowdhry: Any Weakness In Tesla Is A Buying Opportunity

Tesla Inc TSLA shares dropped roughly 2 percent Tuesday following its big third-quarter Model 3 production miss. However, Global Equities Research analyst Trip Chowdhry says investors should be buying Tesla on its recent weakness.

In an email to clients, Chowdhry said Tesla’s long-term story is much more import than its near-term numbers.

“[The] TSLA delivery number means nothing,” Chowdhry wrote. “TSLA is creating an industry. Any weakness is a buying opportunity.”

Early trading action on Tuesday suggests at least some opportunistic investors are taking Chowdhry’s advice to heart. After briefly dipping as low as $331.28 following the open, Tesla shares quickly bounced to the 336 level, down just 1.4 percent from Monday’s closing price. Chowdhry has a $485 price target on Tesla's stock.

One phenomenon potentially supporting Tesla’s share price is the massive outstanding short position in the polarizing stock. According to financial analytics form S3 Partners, Tesla is the most heavily shorted stock in the entire U.S. market. S3 reported a total of $9.6 billion in short interest for Tesla as of the end of September.

With Tesla shares now down more than 7 percent in the past three months, short-sellers have made a large profit from Tesla’s struggles. S3 reports that Tesla shorts netted a $160 million profit in September.

But some short sellers may see the company’s Model 3 miss as the perfect opportunity to lock in profits and close out their positions. That short covering may be contributing to Tuesday morning’s bounce off of the low of the day.

Despite the stock’s recent stumbles, Tesla shares remain up 57.4 percent year to date.

Related Link: Adam Jonas On Model 3: 'Most Auto Launches Have Hiccups, Tesla Is No Exception'

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Image Credit: By Steve Jurvetson from Menlo Park, USA [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons