Tesla shares will sell off this month after a “outrageous” rally as retail investors lose interest in Elon Musk, the research firm says.

  • Vanda Research is predicting a selloff in Tesla shares later this month after a hot start to 2023.
  • Retail investors have invested in shares of the electric car maker, but Elon Musk’s recent announcements have come up short.
  • “Current conditions are more favorable for a sell-off given significant investment flows compared to historical levels.”

Tesla shares started 2023 on the rise thanks to huge interest from retail investors, according to Vanda Research, but Elon Musk’s announcements this week may end up triggering a sell-off rather than an uptick in enthusiasm.

In a note following Musk’s recent colorful announcements at the company’s investor bottom, Wanda predicted that Tesla stock would reduce overall buying in the near future.

Shares in the electric car maker fell 6% on Thursday. Tesla shares are up more than 80% this year after a harsh 2022 performance.

“[Th]Monthly purchases of TSLA by retail investors are off the charts, likely due to a combination of relatively low price tag and the hype around Musk’s master plan,” the strategists said.

That plan may not have caught on this week, however, and Musk’s failure to unveil new car models and set deadlines for certain milestones for the company belied the enthusiasm for the event.

The research firm said there was a reversal in retail flows after Tesla completed a stock split in the summer of 2020 and after a partnership deal with Hertz in 2021, suggesting the same could happen again.

“If we assume that most retail buying was driven by momentum rather than strong conviction, stagnation in results caused by the absence of new buying ‘rumors’ could lead to a significant change in sentiment, investment flows and, ultimately, share price,” Wanda said.

Not only that, strategists note that Tesla shares could come under pressure from a surge in institutional short selling, as short interest has remained relatively flat in recent months. The wider landscape of hard inflation and high rates also makes growth companies like Musk’s less attractive.

“[T]Current conditions are more favorable for a sell-off given significant investment flows compared to historical levels.”

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