Retail Investors are Loading Up on Tesla Stock in 2023

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Tesla (NYSE: TSLA) is among the most popular stocks among retail investors. While retail traders helped propel a 60% rise in the stock this year, Vanda Research believes that the tide might turn now.

Tesla stock fell 65% in 2022 and had its worst-ever year. The stock’s dismal run continued in 2023 and it fell to new multi-month lows after the release of its Q4 2022 delivery report. However, it subsequently rebounded and is now among the top 5 gainers of the S&P 500 index.

Retail fund flows in Tesla stock surge

The rally in Tesla stock, at least in part might be due to retail buying. According to Vanda Research, so far in 2023, retail investors have poured $13.6 billion into TSLA stock. To put that in perspective, retail fund flows in Tesla stock were $17 billion in 2022—a new record.

Commenting on the retail investment in TSLA, said, Giacomo Pierantoni, head of data at Vanda Research said, “the aggregate retail inflows into Tesla have never been higher.”

Anthony Denier, chief executive of online brokerage Webull Financial LLC said that Tesla’s trading volumes are even higher than the frenzy of 2020 and 2021. Notably, Tesla stock soared 740% in 2020 and another 50% in 2021.

The fund flows surged to $500 million a day before Tesla’s investor day on March 1. Markets were expecting big announcements from the company, as has been the case for the last many years.

In particular, markets were expecting announcements related to new products. However, the event failed to impress. While Tesla teased two new models, there were no concrete details. Musk said, “We will have a proper sort of product event, but it would be jumping the gun if we answer your questions.”

Musk also downplayed demand concerns. Previously also, he has allayed fears related to the demand for Tesla cars.

Musk on demand for TSLA cars

Musk began the Q4 2022 earnings call by addressing the demand question and he said he wants to “put that concern to rest.”

He added, “Thus far in January, we’ve seen the strongest orders year-to-date than ever in our history. We currently are seeing orders at almost twice the rate of production. So, I mean that — it’s hard to say whether that will continue twice the rate of production, but the orders are high. And we’ve actually raised the Model Y price a little bit in response to that.”

Tesla Investor Day Failed to Impress

Meanwhile, the lack of concrete announcements on new models played a dampener and TSLA lost $50 billion in its market cap after the event. The company also confirmed that its next Gigafactory would come up in Mexico. However, days before the event, Mexican President Andres Manuel Lopez Obrador said that Tesla would open a factory in the country.

The company also reiterated its previous forecast of producing 20 million cars annually by 2030. To put that in perspective, Toyota, the world’s largest automaker, sold just over 10 million cars in 2022. Tesla expects to produce around 1.8 million cars in 2023 and said that it has the capacity to produce as many as 2 million cars.

To achieve the goal of 20 million deliveries, which amounts to a CAGR of over 41% between 2023 and 2030, Tesla might need to build many more Gigafactories. In the past, Musk said that the company would need over a dozen Gigafactories to reach that goal.

Currently, it has four plants of which two, Berlin and Austin, are in the process of ramping up production.

Vanda Research on TSLA stock

Meanwhile, after Tesla’s investor day, Vanda believes that retail investors might pull out of the stock. Commenting on retail funds flows into Tesla stock it said, “we anticipate a change in trend this month due to the less attractive stock price and the recent disappointment in Musk’s latest announcement.”

It added, “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.”

Musk believes Tesla could become the biggest company

During Tesla’s Q4 2022 earnings call, Musk said that he is “convinced” that Tesla would one day become the most valuable company globally. During the Q3 2022 earnings call, Musk predicted that Tesla’s market cap would one day surpass the combined market caps of Apple and Saudi Aramco.

Musk flaunted manufacturing prowess as its real competitive strength. He added that the company is developing other products also. He however said, “We’re not going to announce them, obviously, but they’re very exciting. And I think it will blow people’s minds when they — when we reveal them.”

EV companies have disappointed markets

Most other EV companies including NIO, Lucid Motors, Rivian, and Xpeng Motors disappointed markets with their recent delivery reports and earnings. Tesla on the other hand has executed relatively well.

It is now setting the direction of the global EV market with its price cuts. Companies like Xpeng and Ford also announced price cuts after Tesla which raised fears of a price war.

Coming back to Tesla stock, it has come off its 2023 highs as the investor day fell short of estimates. While Vanda Research believes that retail investors might pull back from the stock, in the past retail investors as well as bulls like Cathie Wood have doubled down on the stock.

About Mohit PRO INVESTOR

Mohit Oberoi is a freelance finance writer based in India. He has completed his MBA in finance as a major. He has over 15 years of experience in financial markets. He has been writing extensively on global markets for the last eight years and has written over 7,500 articles. He covers metals, electric vehicles, asset managers, tech stocks, and other macroeconomic news. He also loves writing on personal finance and topics related to valuation.