Elon Musk

Tesla short sellers are feeling the burn after its earnings report

Data: S3 partners; Chart: Lazaro Gamio/Axios

Tesla's stock price rallied nearly 18% on Thursday after a stronger-than-expected earnings report, putting a big dent in the profits of short sellers.

Why it matters: Many short sellers pulled out of the trade after the stock fell to $178.97 a share in June, counting $5.16 billion in mark-to-market profits because of the stock's decline, according to data from S3 Partners. But those who continued to short Tesla have paid dearly, and are now in the red, year-to-date.

Tesla's good third-quarter earnings don't excuse its challenging future

TEsla charging station
Photo: Smith Collection/Gado/Contributor/Getty Images

Tesla had a good night, and now the question is whether it's a new day for the pioneering but volatile automaker that kicked off the push to move electric vehicles toward the mainstream.

Driving the news: Tesla surprised Wall Street with a $143 million third-quarter profit on Wednesday evening, and announced plans to ramp up vehicle production at its China factory sooner than expected.