By Tesla Inc (NASDAQ: TSLA) is among the best stocks to short this month following a bull run that’s gone a little too far ahead of itself, according to Wolfe Research analysts.
Shares of the electric vehicle behemoth are significantly overvalued at current levels and could, therefore, see a sharp decline in the months ahead, they added.
Tesla stock does not pay a dividend and remains unattractive for the income investors.
Why is Tesla stock suitable for a short position?
Wolfe Research sees Tesla stock as a prime candidate for a short position as it faces a bunch of notable headwinds in 2025.
To begin with, the company’s financials no longer appear strong enough to support a lofty valuation.
In its recently reported quarter, TSLA reported an alarming 71% year-on-year decline in its net income.
In fact, last year as a whole wasn’t all that exciting for Tesla, given that its annual deliveries declined for the first time ever.
Still, shares of the EV maker started last year at less than $240 and ended above $400 – suggesting its stock price may be disconnected from the fundamentals after all.
BYD is giving TSLA a tough time
Wolfe Research added TSLA shares to its list of “short candidates” also because the automaker faces increased competition, particularly from Chinese rivals in 2025.
The company’s Cybertruck has not really been a success – and more recently, its staunch rival BYD tapped on AI technology from DeepSeek to launch a new advanced driver assistance system (ADAS).
BYD is already giving Tesla a hard time in terms of maintaining its supremacy in deliveries, and now its new offering dubbed “God’s Eye” hints at its plans of going head-on against Elon Musk in the self-driving space as well.
Additionally, Chinese rivals are filling the market with lower-priced electric vehicles that are expected to remain a challenge for TSLA moving forward.
Tesla stock could crash to $135
Investors should also note that Wolfe Research is not the only firm that’s dovish on Tesla stock at writing.
Analysts at Wells Fargo predict that increased competition, weaker demand, and margin pressure could drive Tesla’s stock down to $135.
Most importantly, doubts about the viability of the company’s self-driving technology could trigger a sharp sell-off in Tesla stock, they added in a research note last month.
Even Steve Westly, a former board member of Tesla Inc, is concerned that the EV maker may not be able to justify its premium valuation unless it rolls out a low-cost model and full self-driving technology in its vehicles.
“They’re lagging behind Waymo, there’s a lot of catching up to do,” he said in a recent CNBC interview.
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