Elon Musk beat the short sellers and Tesla gained new types of investors along the way, Credit Suisse says

Published Mon, Jun 29 202011:01 AM EDTUpdated Mon, Jun 29 20204:09 PM EDT

(This story is for CNBC Pro subscribers only.) Electric automaker Tesla proved the short sellers wrong this year and welcomed a flood of retail investors cashing in on the stock's huge rally in 2020, according to Credit Suisse. The Wall Street firm — which has a neutral rating on Tesla — said the many investors that shorted Tesla's stock have been burned, only to be outsmarted by the individual investors that appreciate Elon Musk's vision for the car company. "Valuation is not a deterrent in owning the stock, there is no short thesis (and at this point the only shorts remaining relate to convert hedging), retail interest is elevated, and there is likely support from quant/momentum investors," Credit Suisse research analyst Dan Levy said in a note to clients. Shares of Tesla are up nearly 130% in 2020, despite much of the smart money on Wall Street being generally bearish on the stock. Tesla is one of the most hated stocks by hedge funds based on calculations from Jefferies using short-interest data and securities filings. Goldman Sachs and Morgan Stanley downgraded Tesla earlier this month , saying the stock has gotten ahead of itself. Credit Suisse has a $700 per share price target on Tesla, implying downside from its $960 per share current stock price. Credit Suisse said retail interest in the stock remains strong. Tesla is commonly on the top-traded list on millennial-favored stock app Robinhood. With copious amounts of new, younger investors joining the investing community during the coronavirus market rout, Tesla is getting a boost. Credit Suisse also thinks Tesla has support of some quant and momentum investors. In April, Credit Suisse upgraded shares of Tesla to neutral from outperform, saying the coronavirus crisis will allow Tesla to increase its lead in the the electric vehicle space as other automakers focus on recovering from the economic damage due to the shutdowns. However, the Wall Street firm anticipated a demand air pocket for Tesla in the second quarter on volume weakness. "We never saw that airpocket, and even when we saw negative datapoints (i.e. news of NA price cuts), the stock was barely impacted," said Levy. Credit Suisse now expects second quarter deliveries could range from 90,000 to 100,000, amid reports of a very robust June for Tesla shares. This compares to sell-side consensus of 70,000 and buy-side consensus of 80,000. "Expectations are high for the stock, and the bar will be high for Battery Day in mid-September," said Levy. "Yet at the same time, it's unclear to us how the stock will be challenged. Tesla checks a number of boxes for investors – growth, thematic, catalysts." Shares of Tesla ticked up 5.2% on Monday. — with reporting from CNBC's Michael Bloom.

Tesla CEO Elon Musk speaks at an opening ceremony for Tesla China-made Model Y program in Shanghai on Jan. 7.

Aly Song | Reuters

(This story is for CNBC Pro subscribers only.)

Electric automaker Tesla proved the short sellers wrong this year and welcomed a flood of retail investors cashing in on the stock's huge rally in 2020, according to Credit Suisse.

The Wall Street firm — which has a neutral rating on Tesla — said the many investors that shorted Tesla's stock have been burned, only to be outsmarted by the individual investors that appreciate Elon Musk's vision for the car company.