Tesla plummeted 15%, short sellers made $4.1 billion in a single day, retail investors increased their positions against the trend.

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Tesla shares plunged on Thursday, delivering substantial gains to short sellers, and deepening the divisions surrounding the electric car manufacturer.

Tesla’s share price tumbled as much as 15% during Thursday’s session, marking the biggest single-day drop in over a year, after the company’s second-quarter profits missed expectations and concerns over the prospects of its AI and robotics businesses flared up again.

According to calculations by S3 Partners managing director Ihor Dusaniwsky, the sell-off netted short sellers about $4.12 billion in mark-to-market gains in a single day.

Weighed down by nearly a 30% cumulative drop since the beginning of the year, Tesla short sellers have now racked up an estimated $8.92 billion in mark-to-market gains year to date.

Meanwhile, retail investors have chosen to buy the dip. According to data from Vanda Research’s Viraj Patel, Tesla was the most purchased stock by retail investors on Thursday, with a net buy of $42 million.

Most-Shorted Among the “Magnificent Seven”

Tesla has the highest short interest percentage among the “Magnificent Seven” U.S. tech stocks. According to S3 Partners data, about 3% of Tesla’s free float is shorted, whereas Meta—the second highest among the seven—has a short interest ratio of just 1.6%.

In terms of valuation, Tesla currently trades at a forward P/E ratio of 151 times expected earnings over the next 12 months, making it the most expensive among the seven, and its performance this year has also been the worst of the group.

BNP Paribas analyst James Picariello noted in a research report, "As Tesla aggressively pursues its ambitious AI ambitions with a very rapid pace of capital spending, we remain highly cautious about the speed of its AI progress, and the stock’s valuation already reflects very high expectations." He maintains an “underperform” rating and a $280 price target.

At the same time, lower-than-expected profit margins in the automotive business have cast fresh doubts on the profitability of Tesla’s core business, further shaking confidence in its ability to support its grand vision and capital expenditure plans for the future.

Voices Calling for ‘Bottom Fishing’ Amid Disagreement

Despite strong bearish sentiment, some analysts hold a different view.

Morningstar analyst Seth Goldstein believes Tesla’s current share price is undervalued, maintains his outlook for strong future growth, and sets a fair value target price of $450. In his report, Goldstein wrote:

"For long-term investors, we see this pullback as a good buying opportunity."

Vanda Research analyst Viraj Patel noted that Tesla was the most bought stock by retail investors on Thursday, with a net purchase amount of $42 million.

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