Tesla Stock Becomes Hot Options for Individual Investors
Retail investors pour $14B into shares in 2023. Keep an eye on this growing trend with the latest market insights and investment advice.
In recent weeks, they have scooped up shares of Elon Musk’s electric-vehicle maker at a frenzied pace, setting repeated records for one-day purchases. Already in 2023, they have spent a net $13.6 billion on Tesla shares, approaching the record sum of nearly $17 billion for all of last year, according to Vanda Research.
Their interest in Tesla dwarfs that in any other security, by far.
“The aggregate retail inflows into Tesla have never been higher,” said Giacomo Pierantoni, head of data at Vanda, who added that buying among individual investors has likely contributed to the 61% jump in the stock price this year.
Tesla investors have a reputation for being loyal. They raced to buy the dip last year when the stock was cratering and continued piling in after it bottomed on Jan. 3. As Wednesday’s much-anticipated Tesla's investor day approached, buying set fresh records.
The five-day moving average of individual investors’ net one-day purchases hit roughly $460 million in the last week of February, according to Vanda. The average for the next-most-popular security, the SPDR S&P 500 exchange-traded fund, was just under $150 million.
Three securities followed: the Invesco QQQ ETF, a Nasdaq-100 tracker; Apple Inc.; and Amazon.com Inc., with interest at just a fraction of those levels.
Individual investors poured more than $500 million into Tesla shares on Wednesday ahead of the investor day, which kicked off at 4 p.m. ET. The event largely failed to live up to its hype. Some investors had hoped a new, less-costly vehicle would be announced, to no avail. Plus, the company said it might need to spend nearly $150 billion in the coming years to achieve its long-term goal of becoming the world’s largest car maker by volume.
The stock tumbled 5.9% Thursday following investor day but recouped most of those losses Friday to close at $197.79. Tesla shares are still down more than 50% from their November 2021 record of $409.97.
Durga Bobba, an investor who works in vaccine marketing at a pharmaceutical company, said he bought Tesla shares for the first time in December. Mr. Bobba, who splits his time between San Francisco and Philadelphia, had been interested in Tesla for a while and said he saw an attractive entry point late last year after researching its financials. “I saw the stock go to a multiyear low and thought, ‘If I’m ever going to do it, now’s the time,’ ” said Mr. Bobba.
“I’m a marketing guy, and the broad appeal was the No. 1 reason I bought Tesla,” he added. “People love it, regardless of age and gender.”
Mr. Bobba is one of many recent buyers sitting on substantial gains. “I bought it for about $110 a share and I’m very happy,” he said. “I probably will never sell.”
Tesla shares currently trade at about 45 times the company’s projected earnings over the next 12 months, far off their peak of more than 200 times earnings, according to FactSet. During the selloff late last year, Tesla’s multiple approached 19.
In comparison, the multiples for General Motors Co., Ford Motor Co. and the S&P 500 are 6.8, 8.5 and 17.6, respectively.
The Federal Reserve’s campaign to raise interest rates changed the calculus for Tesla and other growth stocks last year. The stock came under further pressure as 2022 drew to a close when Tesla slashed car prices and investors grew more concerned that Mr. Musk was distracted with his newly acquired Twitter Inc. The shares ended the year down 65%, their worst annual decline so far.
They have rebounded in 2023 along with some of the market’s other most speculative investments, such as bitcoin and Cathie Wood’s ARK Innovation ETF.
Recent trading in Tesla has stood out even compared with the pandemic-era frenzy of 2020 and 2021, said Anthony Denier, chief executive of online brokerage Webull Financial LLC.
“Tesla reigns supreme on our platform,” Mr. Denier said. “We’ve seen a huge spike in volume since December.”
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The proportion of accounts at Webull trading Tesla climbed to 18% in February from about 4% six months ago, Mr. Denier said. Trading in Tesla, which typically accounts for less than 10% of Webull’s equity volume on a given day, reached roughly 35% of total volume on three days this year, he said.
Tesla is one of the most popular plays in the options market as well. Many of the biggest longstanding bets on Tesla are lottery-ticket trades requiring statistically improbable moves to pay out. One such wager is for the stock to reach $825 by January 2024. Nine of the 10 most popular contracts involve expectations that the stock will rise.
Plenty of other investors are moving against Tesla. The electric-vehicle maker remains the most shorted stock in the U.S., according to Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners. Short interest in the stock, however, has dropped to $15 billion as of Wednesday from a peak of more than $51 billion in January 2021.
