Tesla, Inc. TSLA suffered a sharp decline on Wednesday following a downgrade from Wells Fargo, which has raised concerns about the EV maker’s ability to meet delivery goals. Adding to the downward pressure, a prominent Tesla investor and YouTuber announced his decision to short the stock, citing broader economic factors.
Pointing the finger at the Fed: “Short of Tesla,” said Kevin Paffrath, better known as “Meet Kevin” on YouTube and social media.
With nearly 2 million subscribers on his YouTube channel and over 339,000 followers on with what I think the Federal Reserve is going to do with it.” He made it clear that his short position is only short-term.
Paffrath then elaborated on the recent reversal in consumer price inflation, noting a stall in structural inflation despite a sharp decline in cyclical inflation from June 2022. He speculated on the Federal Reserve’s upcoming summary of economic projections, suggesting that the central bank could signal rate increases. to fight inflation, contrary to market expectations of rate cuts.
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Risks abound: “But what you have in the short term is political clout Elon Musk going from CEO of Tesla to CEO of Twitter to CEO of Border Patrol. So you have the political clout of having a real risk of funding Twitter,” Paffrath said.
He warned of liquidity risks for Tesla, as Musk’s involvement in other projects could divert resources from the electric vehicle maker. Additionally, Paffrath highlighted potential challenges such as rising transportation costs and shrinking margins, exacerbated by geopolitical tensions and promotional incentives.
“Between now and the end of next year the tailwind of falling rates probably won’t happen as quickly as we thought and it’s quite possible that maybe all of a sudden rates will fall more quickly than we thought,” Paffrath said.
Looking forward: Paffrath suggested a possible drop to around $148 in the near term, with a strong support level at $101.
“I think it’s unfortunate the situation that Tesla is in and I don’t think all the bad is a given yet, so unfortunately I think it’s going to get a lot worse before it gets better.”
Tesla closed Wednesday’s trading session down 4.54% at $169.48, according to Benzinga Pro data.
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