Investing

Analyst who downgraded red-hot Tesla: 'We're certainly not saying short this stock'

Key Points
  • Canaccord Genuity's Jed Dorsheimer said Wednesday that Tesla's fundamentals need to catch up to the meteoric market run.
  • Dorsheimer took down his rating on Tesla shares to hold from buy. However, he kept Canaccord's price target on Tesla at $750 per share.
  • Shares of Tesla, which were down about 14% early Wednesday, logged a two-session, 36% winning streak on Monday and Tuesday.
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'Take your foot off the accelerator'—Analyst explains his hold rating on Tesla

The analyst who downgraded Tesla stock after its two-day, 36% winning streak said Wednesday that fundamentals need to catch up to the meteoric market run.

"We're certainly not saying short this stock," Canaccord Genuity analyst Jed Dorsheimer, who took down his rating on Tesla shares to hold from buy, told CNBC.

However, he kept Canaccord's price target on Tesla at $750 per share, which would represent a 15% decline from Tuesday's record close of $887 per share.

Short sellers — or traders who bet that a stock will decline — have taken a bath on Tesla, which is one of the most-shorted stocks on Wall Street.

In fact, with shares of Tesla surging nearly 300% in the past six months, those betting against the stock and trying to limit their downside lost more than $8 billion since the beginning of the year, according to data from S3 Partners. That includes nearly $2.5 billion in losses based on Monday's nearly 20% surge alone.

Shares of Tesla, which were down about 14% early Wednesday on the Canaccord downgrade and production delays in China due to the coronavirus outbreak, gained almost 14% on Tuesday.

The Baron call

Before the bell Tuesday morning, billionaire investor Ron Baron told CNBC that he believes Tesla has the potential to hit "at least" $1 trillion in revenue in 10 years and continue to grow from there.

Baron's eponymous investment firm holds nearly 1.63 million Tesla shares, which were worth $1.4 billion based on Tuesday's close. Baron Capital accumulated its Tesla shares at an average cost of $219 each.

Despite Tesla's incredible run, Baron said he will not sell a single share of the electric-auto maker. He said his faith in the company "was never shaken," even facing volatility in the stock and "some self-inflicted wounds" by Tesla CEO Elon Musk.

"I don't necessarily disagree with what Ron Baron is saying. But I do think we need to prudent," Dorsheimer said Wednesday on "Squawk Box."

"It would be irresponsible to not acknowledge that a large component of this story, which relies on domestic demand in China, is at risk right now," he added, in a reference to the impact of the coronavirus in China.

Tesla executive Tao Lin said overnight that cars initially scheduled for delivery in early February will be delayed.

Last week, Tesla CFO Zach Kirkhorn said on the company's quarterly post-earnings call that the Shanghai factory will remain closed for an extra week to a week and a half.