Tesla's stock just had one of the wildest weeks ever — here's what happened

Key Points
  • Tesla had a roller-coaster week to begin February, with the stock swinging hundreds of dollars in both directions.
  • Shares ripped higher in two consecutive days of trading after multiple optimistic forecasts for Tesla's future growth sparked a short squeeze, with the stock roaring to an intraday high of $968.99.
  • But fears of production and sales delays in China, along with concern that the stock had become a speculative bubble, sent the shares spiraling lower.

Elon Musk's Tesla had a week for the Wall Street record books, swinging hundreds of dollars in both directions as some investors rushed to buy shares and others rushed to cover their negative bets.

The stock began the week just above $670 a share — a record high after a strong end to last month following better-than-expected quarterly earnings results.

But that was nothing compared with what was to come.

Shares ripped higher in two consecutive days of trading after multiple optimistic forecasts for Tesla's future growth. It climbed nearly 20% on Monday and almost 14% on Tuesday, roaring to an intraday high of $968.99.

But uber-bullish forecasts have been made before in the stock. Why such a big move now? That's still unclear. Animal spirits have seemed to take over. Or perhaps it's just a giant short squeeze?

The stock's rapid move higher forced short sellers to buy back the equity at a higher price in order to cut their mounting losses. If enough short sellers buy in tandem, it can create higher demand and itself drive the stock's price even higher, a phenomenon known as a short squeeze.

"In our experience, we've never seen a stock rise that much that fast with such little regard to past fundamentals or track record," Needham analyst Rajvindra Gill wrote in a note to investors titled "Irrational Exuberance Hits All Time High."

But then Tesla backed off that record level. Fears of production and sales delays in China, along with fears that the stock had become a speculative bubble, sent the shares spiraling lower. The company closed stores temporarily due to the outbreak of coronavirus and shares fell 17.2% on Wednesday.

Additionally, on the first three days of the week Tesla saw trading volume that shattered the company's previous record levels. Up to that point, Tesla's typical day saw about 18 million shares change hands. Monday, Tuesday and Wednesday blew past that mark, with record daily trading volumes of 47 million shares, 60 million shares and 48 million shares, respectively.

Paul Jacob works on the general assembly of the Tesla Model 3 at the Tesla factory in Fremont, California, on Thursday, July 26, 2018.
Mason Trinca | The Washington Post | Getty Images

Thursday and Friday proved to be much calmer for the stock, as it gained a comparatively small 1.9% on the former day and slipped 0.1% on the latter.

Here's the full rundown of what happened over the past five days of Tesla trading.

Monday: The rally begins

Shares of Tesla soared 19.9% on Monday, as Argus Research raised Wall Street's bar for the stock to its highest level yet. Tesla's gain made it the stock's best day of trading since May 2013.

The investor Steve Eisman was among those short sellers who gave up this week, saying he ate his losses amid Tesla's "cult-like" rally. Eisman is known for his bet against the subprime mortgage crisis about a decade ago.

"Look, everybody has a pain threshold. When a stock becomes unmoored from valuation because it has certain dynamic growth aspects to it, and has cult-like aspects to it, you have to just walk away," Eisman told Bloomberg Television.

Tuesday: Hits nearly $1,000 a share

Major Tesla shareholder and investment mogul Ron Baron kicked Tesla's rally into high gear when, before the market opened, he forecasted that the company will top $1 trillion in revenue in a decade – and keep growing.

"It's nowhere near ended at that point and time," Baron said on CNBC. "There's a lot of growth opportunities from that point going forward."

The stock blew past $800 a share in early trading and then $850, $900 and finally topped out just shy of $970 a share.

"I just can't believe this freaking stock. It's insane," Roth Capital analyst Craig Irwin said Tuesday. "This is a big separation from those of us who like to pull out the calculators and look at reality."

While the stock pulled back in the last hour of Tuesday's trading to close at $887.06, that level still was far and away the stock's highest ever. And, as Musk owns about 19% of Tesla's stock, his net worth grew $8.1 billion across the gains made on Monday and Tuesday.

At the same time, shorts were battered. Short sellers' mark-to-market losses since the beginning of the year grew to $11.5 billion by the end of Tuesday.

Wednesday: Coronavirus fears tank the stock

Tesla's run up ended Wednesday as shares cratered 17.2% after its China vice president Tao Lin announced online that that car deliveries to customers would be delayed due to the spread of the coronavirus. That, combined with Tesla's previous closing of its Shanghai factory, caused investors to fear the company would see worse production and higher costs than previously expected.

"The proposed delivery (of cars) in early February will be delayed," Lin announced on Chinese microblogging service Weibo, according to a CNBC translation, in response to a question from a user. "We will catch up the production line once the outbreak situation gets better."

China's growing electric vehicle market is key for Tesla, especially since the company began rolling out Model 3 vehicles from its Shanghai Gigafactory in January.

Thursday: Tesla temporarily closes China stores

In addition to production shutdowns, a Tesla sales employee announced its stores in mainland China would be closed temporarily.

"From today on, Tesla stores are all closed throughout China. But I will answer questions online, around the clock. Online orders are still welcome. We suggest all of you stay home, and take good care of your health," the employee wrote on social media, according to a CNBC translation of the Chinese text.

Tesla shares initially dropped more than 6% on the announcement but later recovered, as another period of above-average volume saw the stock swing throughout the day. But Tesla's stock slowly moved higher, finishing trading up nearly 2%.

Friday: Tesla cools off

Finally, Tesla had an uneventful day of trading to end the week. After its earlier tug-of-war-like moves, shares fell just 0.1% and ended the day with below average trading volume.

Tesla shares finished the week up 15%. The stock is up more than 75% to begin 2020.