Markets may be volatile as 2023 kicks off, but things look particularly bad for Tesla (NASDAQ:TSLA) stock. The long-running leader of the electric vehicle (EV) sector initially pulled into 2022 on a high note. This past year, though, things have taken a sharp 180-degree turn.
Shares have been in free fall ever since CEO Elon Musk turned his attention to running Twitter. In mid-December, Musk offloaded roughly $3.6 billion worth of TSLA stock, likely to cover his losses as the social media giant struggles.
It’s never good news when a company’s CEO starts selling off shares. But Musk isn’t the only one who has opted to sell TSLA lately. Today brings news that retail investors are also souring on Tesla. According to CNBC, small-time investors have collectively offloaded $811 million worth of shares.
This raises some questions about the future of Tesla. Should investors be worried? Let’s take a closer look.
What’s Happening With TSLA Stock?
In keeping with its recent patterns of decline, Tesla closed down by almost 3% today despite an earlier attempted rally. This drop can mostly be attributed to negative market momentum. Fellow EV producers and Nasdaq stocks Lucid (NASDAQ:LCID) and Rivian (NASDAQ:RIVN) have both fallen further than TSLA today, but neither are facing problems nearly as big as Tesla right now.
Late in 2022, as TSLA stock trended downward, Musk tweeted about the declines. He offered an explanation that levied most of the blame toward external economic forces — namely, rising interest rates.
In simple terms:
As bank savings account interest rates, which are guaranteed, start to approach stock market returns, which are *not* guaranteed, people will increasingly move their money out of stocks into cash, thus causing stocks to drop.
— Elon Musk (@elonmusk) December 20, 2022
That said, Musk failed to account for any company-specific forces that also posed a threat to share prices. His tweet happened more than two weeks ago, but now it’s more important than ever to account for Tesla’s bigger problems.
TSLA stock isn’t the only name that has fallen out of favor with retail investors. According to JPMorgan (NYSE:JPM), this past week made for the “third worst week of net selling in history,” as traders offloaded more than $3 billion in assets. Managing Director Peng Cheng attributed part of this to tax-loss selling. However, it’s hard to ignore the fact that sentiment toward TSLA stock has shifted. According to Ape Wisdom, TSLA has been trending on r/WallStreetBets for the past 24 hours, but not for the right reasons. Overall sentiment is at 52% with mentions down 38% and upvotes down 50%.
It’s important for investors to see the big picture here. Last year brought plenty of volatility. Inflation raged across markets and Musk’s quest to acquire Twitter had experts predicting a grim future. Through it all, investors stood loyally by TSLA stock, riding out the turbulence in hopes that 2023 would bring a rebound. The fact that retail investors are deciding to turn their backs on a stock led by Elon Musk says a lot about how they feel. Many no longer have faith that TSLA stock will rise in the new year.
The Road Ahead
Not all investors have soured on the EV leader, of course. Famed contrarian investor Cathie Wood recently doubled down on TSLA stock after making multiple purchases at the end of 2022. However, the important takeaway from this news is that retail investors seem to be heeding advice to sell meme stocks and the like before they die. If this trend continues, TSLA will fall even further.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
