Figure 1: Tesla Short Sellers Profited Nearly $12 Billion in 2022

Read also: Citadel Securities Is Accused Of Illicit Trading Tactics; Here’s What You Need To Know

It's no surprise that 2022 — marked by high inflation, rising interest rates, and a flirtation with recession — has been bad for the stock market in general. Take the S&P 500  (SPY) - Get Free Report , for example. It's down about 15% year-to-date, while the Nasdaq  (QQQ) - Get Free Report  has dropped about 27%.

The performance of Tesla's  (TSLA) - Get Free Report  stock, which comprises about 2.4% of the S&P 500 and about 5% of the Nasdaq, has been no different. Tesla shares have plummeted an incredible 51% in 2022 so far. That makes this the worst year for the Elon Musk-led company's share price.

The bearish macro scenario for tech and other stocks that trade at stretched valuation multiples was one of the main culprits behind the sharp drop in Tesla shares during 2022.

Also, the lockdowns in China, global supply-chain disruptions, and Elon Musk's $44 billion Twitter purchase — which forced him to sell $4 billion worth of his Tesla shares — also helped to drag the stock down.

With that, those who bet against Tesla have lined their pockets. As Ortex points out, Tesla has been the stock that has generated the most profits for short sellers in 2022 so far.

Year to date,, short sellers have gained some $11.59 billion in mark-to-market profits. In November alone, short sellers' profits came in at $2.3 billion — intensified by the instability generated by Musk's purchase of Twitter.

Even so, the nearly $12 billion of short interest worth in Tesla shares comprises just over 2.5% of its total float. This is because Tesla's market cap stands at about $610 billion. Borrow fees for Tesla shares are also low, at an average of 0.30% annualized.

The Twitter deal was probably the key point of the year for bearishness regarding Tesla. One of the most enthusiastic Tesla bulls, Wedbush analyst Dan Ives, has removed Tesla from his "best ideas list."

According to Ives, Tesla is going through tough times due mainly to future concerns over the Twitter deal, which he called the "albatross around shareholders' necks."

Still, Ives sees Tesla as a buy with a $300 price target. In an earlier comment, the Wedbush analyst said that Tesla is the best electric vehicle (EV) pick because the company still "owns" the EV market, while the competition is still "paying rent."

Some TSLA bears tend to classify Tesla as a meme stock. One of the reasons is because the company is led by Elon Musk — who was somehow involved with GameStop's short-squeeze event and also with meme coin Dogecoin (DOGE).

Tesla also has meme-stock characteristics such as a stretched valuation, a volatile share price, and popularity among retail investors.

Among the bears who claim Tesla is a meme stock is famous trader Danny Moses, who was featured in the book and movie The Big Short. He called Tesla "the original meme stock" a few months ago, revealing that he has a short position in the company.

According to Moses, the reason behind this label for Tesla is that Musk's company represents everything that is wrong with the market. At the time, he saw Tesla's valuation as being out of sync with its fundamentals.

"If you think about it, $TSLA is the original #memestock; its stock price doesn't match fundamentals & trades on a 'story' that will never materialize," he wrote.

Moses' complaint about Tesla's valuation is far from unfounded. Tesla's price-to-earnings

9P/E) ratio traded above 500 times during 2020 and 2021 and had the highest P/E ratio among large-cap stocks for quite some time.

Currently, with the sharp devaluation in 2022, Tesla's price-to-earnings ratio is 52x, which is still 378% higher than the industry average.

However, it is worth noting that Tesla stock is priced according to its growth potential, which is quite promising. Even though there is a lot of speculation in the electric vehicle industry, today Tesla is the largest EV manufacturer on the planet.

And this will most likely make Tesla the main figure of the largest transformation the automobile industry has undergone since the 1950s.

So there is a rational reason behind Tesla's astounding 1081% share price growth over the past five years. Tesla has made its shareholders — including many retail investors — very happy.

Tesla's recent track record has also been phenomenal. Sales over the last five years, on average, have been up 46%. That's compared to an industrywide drop of 1.8% over the same period.

This year, analysts at Goldman Sachs expect Tesla to deliver 1.4 million units. This would represent the achievement of the company's goal of 50% year-over-year growth.

Also, when looking at Tesla's balance sheet, the numbers appear solid. There is about a $19 billion cash position with only $6.6 billion in debt. It also sports above-average profitability for the auto industry, with margins standing at 27% versus an industry average of 18%.

Even though many bears are insisting on shorting Tesla due to its meme-stock behavior, its dominant position in the EV market, its growth potential, and its robust financial condition are irrefutable.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)

Co-producer of The Street's financial channels: Apple Maven, Amazon Maven and Wall Street Memes. Researcher and operations manager at DM Martins Research.