Retail investors or retail they blindly trust Tesla. Despite the fact that the company has decreased its value on the stock market by more than 36% so far this year, the manufacturer of electric vehicles continues to attract this type of investor, who has seen how the value of the company rebounded by 14%. in the last week.
“In May, we saw the strongest monthly purchase of Tesla stock by retail investors since August 2020.when the company announced its first stock split,” says Fabian Birli, an analyst at Vanda Research, in a statement collected by Bloomberg. Whatever the reason (an anticipation of another stock split, Musk’s army of fans doubling down after the Twitter deal, or just plain crash buying), there has been a “Clear increase in retail sentiment for Tesla since the beginning of the month”Birli adds.
Net purchase of Tesla shares by retail investors was $708 million in May (about 659.8 million euros at current exchange rates) until last Friday, the second largest purchase among the shares of large technology companies, only behind Apple. Tesla was the biggest gainer in the NYSE FANG+ Index last week and the third largest contributor to the S&P 500 Index as it posted its biggest weekly gain since November 2020.
The company led by Elon Musk suffered on the stock market especially from April due to problems manufacturing in China, investor fears about slowing growth around the world and the noise generated around Musk’s offer for get hold of Twitter.
Nevertheless, the manufacturer’s shares are still not cheap compared to its competitors in the automotive sectoras Tesla’s market capitalization, which is over 790,000 million dollars, is much higher than that of any other car company. Tesla retail investors bear much of the blame for Tesla being so highly valued in a bag.
“A good way to look at the situation is to compare the cult of Elon Musk with the cult of Bitcoin and other cryptos until recently,” says Matthew Maley, chief market strategist at Miller Tabak. “Musk has made game-changing products in a number of areas, so the level of confidence is much higher and that is why the stock has been able to bounce well now that the overall market has stabilized, while Bitcoin is still languishing. ”, he argues.
As the ability of retail traders to influence the stock market has increased in recent years, companies have recognized the value of attracting these investors with maneuvers such as stock splits, which reduce the price of a security and make it more attractive to private investors. Tech giants Alphabet and Amazon also recently split their shares in an effort to attract buyers. retail. In fact, Tesla’s own stratospheric rise in its share price in 2020 was fueled in part by a stock split, and on March 28 the company announced a plan for a further spin-off.
“Tesla’s loyal retail following has an advantage for the company’s long-term shareholders, as these investors are willing to look through the short-term negatives, which softens declines in the stock and can accelerate any trend.” bullish,” says Gene Munster, a former technology analyst who is now a managing partner at venture capital firm Loup Ventures.
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Buying and buying Tesla shares, the mantra of Elon Musk’s legion of followers