Tesla short sellers lose more than $4 billion on the electric vehicle maker's post-earnings stock rally

Tesla's (TSLA) stock rally after earnings has cost short sellers billions.

Tesla short sellers lost $4.2 billion in the two days following the electric vehicle maker's third-quarter results last Wednesday, according to data from S3 Partners.

Tesla reported better-than-expected third-quarter profit and improved margins after the bell on Oct. 23. These successes helped Tesla shares achieve their biggest daily gain in a decade. The stock rose 22% last Thursday, its best day since 2013, and on Friday the stock rose another 3.3%.

Tesla shares rose about 1% on Monday.

This is not the first time this year that short sellers have paid dearly for their bets against the Elon Musk-led company. In the week following Tesla's better-than-feared fiscal first-quarter earnings report in April, short sellers lost more than $5 billion.

Tesla stock performance has been volatile over the past month. Shares fell in early October as the automaker missed Wall Street estimates for its third-quarter deliveries, issued a recall and discontinued a cheaper model. The stock then rose in anticipation of the unveiling of Tesla's robot taxi, but fell sharply when the event failed to live up to the hype.

Tesla's recent rally over the past week came despite mixed third-quarter results. While Tesla beat Wall Street forecasts for adjusted earnings per share and gross margin, its quarterly revenue of $25.18 billion was below expected $25.4 billion, according to Bloomberg consensus estimates.

A range of Wall Street analysts from Morgan Stanley (MS), Bank of America (BAC) and Deustche Bank (DB) to Wedbush, Canaccord Genuity and William Blair reiterated their buy ratings on Tesla shares following the report.

Bank of America also raised its price target on the stock to $265 from $255.

The company's senior auto analyst John Murphy said on Yahoo Finance's Opening Bid podcast (video above) that he is eyeing a further increase in Tesla's price target.

While Tesla's recent focus on its AI ambitions had unsettled investors, Morgan Stanley analyst Adam Jonas said he was encouraged that Tesla placed an emphasis on boosting its auto business, which accounts for 80% of Tesla, in its third-quarter earnings release -sales. Jonas pointed to CEO Elon Musk's comments about targeting 20% ​​to 30% growth in electric vehicle deliveries in 2025 while focusing on reducing production costs.

“As investors struggle with the transition of the automotive business model to AI, these pressures remind us that the profitable development of the automotive business remains a high priority,” Jonas wrote in a note to investors.

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