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Research Firm Sees Retail Investors Bailing on Tesla Stock

Company’s investor day may have marked beginning of end to 2023 stock surge

Shares of electric vehicle pioneer Tesla rose 5% Friday, a day after investors expressed their disappointment with the company’s first-ever investor day for analysts.

But one investment research firm says the rebound may be short-lived.

Vanda Research, which tracks investment flows from retail buyers and sellers, regarded the company’s investor day as a potential “catalyst”one that could halt the substantial purchases from retail investors who have fed Tesla’s 62% stock surge year-to-date.

That’s because, Vanda said, Wednesday’s investor day failed to live up to investors’ hopes surrounding the release of Tesla CEO Elon Musk’s Master Plan 3 for the company.

The day after, Tesla’s shares closed down 6%.

“The monthly purchases of Tesla by retail investors are off the chart, likely attributable to a combination of relatively low perceived price and excitement surrounding Musk’s Master Plan,” Vanda wrote in a research report. “However, we anticipate a change in trend this month due to the less attractive stock price and the recent disappointment in Musk’s latest announcement.”

Musk didn’t unveil new product models or provide clear timing for them at Wednesday afternoon’s presentation at the company’s gigafactory in Austin,Texas.

“If we assume that much of the retail buying (in Tesla’s stock) was driven by momentum rather than a strong conviction, a stagnation in performance caused by a lack of new ‘rumors’ to buy could result in a significant reversal in sentiment, investment flows and ultimately stock price,” Vanda wrote in the report.

From Modestly Pricey to Really Expensive in Six Weeks

As central bank interest rate hikes aimed at curbing high inflation sent broader global stock and bond markets lower, shares of Tesla plunged along with other technology-laden stocks in 2022, ending the year down 65%.

They opened 2023 trading at $123.18 and fell to as low as $101.81 in the year’s first full week of trading.

In the next six weeks, however, they more than doubled to their Feb. 16 year-to-date peak of $217.65 per share. Even after Thursday’s slide, Tesla’s stock remained at $190.90 per share.

From a valuation perspective, that left Tesla’s shares trading at 57 times the company’s trailing 12-month, per-share earnings,1 more than three timesmore than the comparable price-to-earnings ratio of 18 for the S&P 500 Index.2

Vanda suggested that hedge funds may decide to take short positions on it, particularly if inflation doesn’t decline as steadily as investors hoped just last month.

“Institutional investors have significant potential to open new short positions, as short interest has remained relatively stagnant over recent months,” Vanda wrote in the report.

Source
investopedia

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