This 'Big Short' Investor Owns Every Magnificent 7 Stock Except The One He Thinks Has A Cult-like Following

"Big Short" investor Steve Eisman's portfolio includes every stock in the Magnificent 7 except for one, whose shareholders he likened to a cult for their unwavering belief in its long-term future.

"I will confess that of the Mag 7, I own every single one of them except for Tesla," said Eisman, during a recent appearance on the "Lemonade Stand" business podcast.

The Magnificent 7 includes Nvidia Corp. (NASDAQ:NVDA), Microsoft Corp. (NASDAQ:MSFT), Apple Inc. (NASDAQ:APPL), Alphabet Inc. (NASDAQ:GOOGL), Amazon.com, Inc. (NASDAQ:AMZN), Meta Platforms Inc. (NASDAQ:META) and Tesla Inc. (NASDAQ: TSLA). They got their name because they've been seven of the tech industry's best-performing stocks over the last decade.

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Eisman's doubts about Tesla may seem counterintuitive, considering the electric vehicle maker's shares are trading near an all-time high, but he has proven his ability to sniff out market bubbles about to pop.

He was profiled in the book, "The Big Short," which tells how he and a small group of astute investors short sold the credit default swaps underpinning the U.S. mortgage market before it collapsed in 2008. In the hit movie of the same name, Eisman was the inspiration for fund manager Mark Baum, played by Steve Carrell.

Eisman pointed out to the Lemonade Stand hosts that Tesla's earnings have been trending downward for the last several years.

"I just want you to think about that just, just from a perspective of people who do real fundamental work and how difficult it can be to short stocks," he told them.

"So, peak earnings of Tesla were in 2022," he continued. "The company earned, I think like $4.50, and this year I think they're going to earn a buck-fifty. So the earnings are down from 2022 through 2025, 60%. And the stock is slightly higher."

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Although Eisman is correct about the downward slide in Tesla's earnings, he was speaking off the cuff during the podcast, and his estimations were not 100% accurate. Tesla's peak earnings were $4.30 per share, and they came in 2023, according to investment data platform Macrotrends. Tesla's earnings then declined by more than half to $2.04 per share in 2024.

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Nonetheless, Eisman showed the hosts how this sustained slide in Tesla earnings might entice some investors to short its stock.

Imagine they were an analyst at a big hedge fund, he told them, and they went to their project manager and said, "I got this great thesis: There's this company, it's called Tesla. I know you've heard of it and my thesis is that from 2022, the earnings are going to go straight down every year until we get to 2025 where the earnings will be 60% lower than 2022, and I think in 2026, they'll be lower still. What do you think?'"

Eisman answered his own question by saying, "Let's short the p*** out of it." He then noted that this analysis is "100% right fundamentally," but that Tesla is "a cult, so it doesn't work. You go crazy."

Lemonade Stand co-host Doug Wreden interjected to ask, "So, why doesn't it work? We did a whole episode where we sort of analyzed and debated Tesla, and I–"

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Eisman cut him off and said, "Because it's a cult."

"A cult can't justify a trillion-dollar valuation," said Wreden.

Eisman reiterated his belief that Tesla is a cult and talked about tech analyst Dan Ives, who was a guest on his own podcast, "The Real Eisman Playbook": "His thesis is that Tesla is gonna do very well with robo-taxis and AI and robots and it's all gonna be great and that's why you gotta own Tesla."

Eisman acknowledged the possibility that Tesla's most devoted shareholders may not be off the mark. "You know what, number one, [Ives] could be right, and number two, there's no argument against it," Eisman said. "Like, you're arguing against something that will happen in the future and people believe it."

That's the core of Eisman's contention that Tesla has a cult-like following: Under normal circumstances, a company's stock goes down when its earnings go down, but that's not happening here. Tesla shareholders believe the stock will go up, and as Eisman notes, there's no convincing them otherwise.

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