Tesla, Inc. TSLA
After five years short, Citron reverses on Tesla: Model 3 is dominating luxury and EV segments, Munro confirms 30% margins, and worst-case math yields $599/share.
Thesis
Citron Research, publicly short Tesla for five years, reverses its thesis and goes long as Model 3 Q3 2018 deliveries hit 54,540 units — dominating U.S. luxury and EV segments while BMW, Mercedes, Audi, Toyota and Honda sedan sales post accelerating YoY declines. The note argues demand is no longer backlog-driven but incremental, with top trade-ins coming from Prius, Accord and Civic buyers. Munro Associates' Model 3 teardown confirms gross margins above 30%, removing the profitability question and the capital-raise overhang. Citron sees further catalysts in a wholly-owned Shanghai factory, European Model 3 launch, Model Y unveil, Tesla 9.0 autopilot, and likely S&P 500 inclusion. A P/E sensitivity grid implies $599/share even in the worst case (500k deliveries at 20% margin, 20x P/E), transitioning Tesla from proof-of-concept to a TAM growth story.
SCQA
Citron has been publicly short Tesla for five years, predicting that 200-mile plug-in competitors would commoditize Musk's lead well before Model 3 could scale into a sustainable mass-market luxury EV.
No Tesla killer has materialized; Q3 2018 delivery data shows Model 3 capturing 38% of entry-level luxury share while incumbents post double-digit YoY declines, invalidating the core short thesis.
Citron flips to long Tesla, citing Munro's teardown confirming 30%+ gross margins, a self-funding cash profile, Shanghai, Europe, Model Y, Tesla 9.0 and probable S&P 500 inclusion as forward catalysts.
A worst-case 500k deliveries at 20% gross margin and 20x P/E implies $599/share; base-case 1.25M-delivery scenarios stretch to $1,045-$1,635, with bull cases well beyond.
The three reasons
- 1
Model 3 captures 38% of entry-level luxury market while BMW, Mercedes, Audi post 20%+ YoY declines
- 2
Munro Associates teardown confirms Model 3 gross margin above 30% — unmatched by any EV peer
- 3
Worst-case valuation (500k deliveries, 20% margin, 20x P/E) still implies $599 per share
Primary demands
- Investors should be long Tesla, not short, into Q3 2018 earnings
- Re-rate TSLA from a 'proof of concept' story to a TAM growth story
- Acknowledge Model 3 as a proven hit with 30%+ gross margin potential
KPIs cited
Pattern membership
Where this document fits across the library's 12 rhetorical / structural patterns.
Precedents cited
- Citron's own 2013 Tesla short note (self-quoted and repudiated)
- Munro Associates Model 3 teardown (April-July 2018)
- Consumer Reports Model 3 braking OTA-fix episode
Notable slides (5)
Notes
Unusual specimen: a short-seller publicly reversing a five-year thesis and going long. The document self-quotes Citron's 2013 short call ('multiple other 200-mile range plug-ins') to repudiate it. Tone blends analytical due-diligence with self-deprecating acknowledgement of being wrong ('we can't believe we are writing this'). Notably Citron still discloses ongoing $420-tweet litigation against Musk while issuing the long call. No named author — signed as 'Citron' (firm principal is Andrew Left). Campaign phase coded as post_mortem to capture the thesis-reversal nature; could also be read as an initial_thesis for the new long position. Layout is a Word-style memo with embedded third-party charts (CleanTechnica/Datawrapper) and an Excel-style delivery table, plus a Bloomberg-style T. Rowe Price holdings screenshot. Not visually distinctive but narratively rich for studying short-to-long reversals.