SpaceX and Tesla Are Two of the Most Compelling Shorts, Market Vet Says

SpaceX stock has stumbled out of the gate since its IPO in June, but one veteran fund manager thinks there’s more trouble ahead for Elon Musk’s rocket company.

George Noble, formerly the manager of Fidelity Overseas Fund, was bearish on the stock as it headed for its IPO, and his tune hasn’t changed since the debut. Now, he’s calling for more pain for both SpaceX and Tesla on the horizon. He said each stock represents “one of the best shorts in the market.”

Following SpaceX’s historic IPO, Noble predicted that the stock price would fall by as much as 50% before the end of the year. Noble had previously raised concerns regarding Nasdaq’s decision to allow SpaceX to be fast-tracked into the Nasdaq 100, which forced passive indexes that track the index to load up on the stock.

“Grandma’s 401k now owns a $2 trillion company at roughly 90 times revenues. That’s outrageous,” Noble told Business Insider.

Noble says SpaceX and Tesla are both overvalued, but he’s also wary of the narrative around Musk’s two companies, noting that the retail trader buzz is shifting. It’s part of the reason he sees them as such compelling short bets.

Noble said that when he’s searching for short plays, he screens for stocks that have high valuations, are boosted by social media hype, and are facing a difficult macroeconomic landscape.

For this reason, Noble said he’s grown even more bearish on Tesla than he was in January, when he described it as the stock market’s biggest bubble. He said that Musk’s power over investors may be slowly fading, particularly after the company’s significant Q2 profit miss.

“The shine’s wearing off. Tesla’s unchanged for five years. Earnings are collapsing,” he said, adding that he sees the “Elon premium” that’s boosted Tesla stock as being over.

Noble added that he thinks that both Tesla and SpaceX should be trading at roughly $30 per share, implying 91% downside for Tesla and a 79% drop for SpaceX.