Research Firm Sees Individual Investors Bail Out Tesla Stocks

Shares in electric vehicle pioneer Tesla (TSLA) rose 5% on Friday, a day after investors expressed disappointment at the company’s first analyst investor day.

However, an investment research firm says the recovery may be short-lived.

Vanda Research, which tracks investment flows from retail buyers and sellers, viewed the company’s Investor Day as a potential “catalyst” — one that could halt the substantial retail buying that has fueled Tesla’s 62% year-to-date stock surge.

That’s because, Vanda said, Wednesday’s Investor Day fell short of investors’ hopes regarding the release of Tesla CEO Elon Musk’s Master Plan 3 for the company.

The day after, Tesla shares closed down 6%.

“Monthly retail investor purchases of Tesla are exceptional, likely due to a combination of a relatively low perceived price and excitement surrounding Musk’s master plan,” Vanda wrote in a research note. “However, we expect a turnaround this month given the less attractive share price and the recent disappointment over Musk’s recent announcement.”

Musk didn’t unveil any new product models or give a clear timeline 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 shares) was driven by momentum rather than strong conviction, stagnation in performance caused by a lack of new ‘buy rumours’ could result in a significant reversal of the Sentiment and investment drive flows and ultimately the stock price,” Vanda wrote in the report.

From modestly expensive to really expensive in six weeks

As the central bank’s rate hikes to curb high inflation sent broader global stock and bond markets lower, shares of Tesla along with other tech-heavy stocks plummeted in 2022, ending the year down 65%.

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

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

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

Vanda hinted that hedge funds could decide to go short, especially if inflation doesn’t fall as steadily as investors had hoped just last month.

“Institutional investors have significant potential to open new short positions as short interest has been relatively flat over the past few months,” Vanda wrote in the report.