The recent surge in Tesla Inc. TSLA stock has led to comparisons with meme stocks, a term used to describe stocks that experience rapid and often irrational price movements. This observation was made by renowned bond manager Bill Gross.
What Happened: “Bond King” Gross took to X on Tuesday to express his views on Tesla’s current stock behavior. He likened the electric vehicle company’s situation to that of a “meme stock,” citing “sagging fundamentals” and a significant increase in stock price.
Despite the 10-day winning streak, Gross believes that Tesla’s recent gains are not justified due to its weakened fundamentals. This includes a year-over-year decline of 5.8% in second-quarter vehicle deliveries, which was still above analyst estimates.
He also pointed out that Tesla is not the only company experiencing this kind of “pump and dump,” stock behavior, mentioning other stocks such as Chewy Inc. CHWY, Zapp Electric Vehicles Group Ltd. ZAPP, and GameStop Corp. GME.
Why It Matters: Gross’s recent remarks on Tesla come amid a broader context of his skepticism towards tech stocks.
Earlier this year, Gross advised investors to avoid the tech sector despite strong quarters from companies like Microsoft Corp. MSFT and Alphabet Inc. GOOG, GOOGL. He recommended sticking to value stocks and highlighted energy infrastructure firms as safer bets.
Meanwhile, Tesla’s market share in the U.S. electric vehicle sector has been shrinking. For the first time, Tesla’s EV market share fell below 50% in the second quarter, dropping to 49.7% from 59.3% in the same quarter last year, according to Cox Automotive.
Additionally, prominent investors like Cathie Wood‘s Ark Invest have been trimming their Tesla holdings. After selling Tesla shares for three consecutive sessions, Ark paused its sales, possibly anticipating a trend reversal.
Moreover, former Tesla critic Ross Gerber has shifted his stance, now expressing bullish views on the company. This change underscores the divided opinions on Tesla’s long-term potential.
Price Action: Tesla shares closed 3.7% up at $262.33 on Tuesday. The stock is up 5.6% year-to-date, according to data from Benzinga Pro.
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Image made via photos on Shutterstock
This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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