- Tesla’s stock performance is positively correlated to the number of Reddit posts citing TSLA, Barclays found.
- The automaker has seen outsized attention from retail investors with active discussions on social media.
- “We have painfully learned that social media memes can matter more for TSLA share performance.”
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Tesla’s stock performance might just be linked to online chatter over the automaker on social media forums like Reddit, according to a Barclays study released on Tuesday.
“On the autos team, we have painfully learned that social media memes can matter more for TSLA share performance than actual financial metrics, fundamentals or (dare we say) valuation,” strategists Ryan Preclaw and Brian Johnson wrote.
Barclays examined data on the Wall Street Bets subreddit to find big upticks in posts about Tesla have been predictive of stock returns a few days later. “In the model we think is most appropriate, a swing up of 7 or more submissions today over yesterday has been predictive of outsized returns in TSLA stock tomorrow,” the investment bank said.
The strategists laid out a scatter plot that suggests there is at least some relationship between attention on Wall Street Bets and Tesla returns. In conducting the analysis, Barclays focused on posts that reference either $TSLA or TSLA (in all caps), and no other identifiable ticker.
The strategists said there are statistically significant relationships between the number of returns and the absolute number of posts one and two days earlier, and between changes in post counts and following days’ returns.
“However, all of this analysis is ‘in sample.’ The situation has been so dynamic that there are simply too few examples to be confident of a stable process between WSB posts and TSLA returns,” Barclays said. “Even more than usual, past results might not predict future performance.”
Tesla tumbled as much as 20% this week, making CEO Elon Musk relinquish his title as the world’s richest person. Shares in the EV-maker sank after the company halted new orders for its cheaper version of the Model Y crossover. The drop was also partly driven by Musk tweeting that the prices of bitcoin and Ethereum “do seem high” after their recent rallies. Tesla was trading 1.6% lower, at $730 per share, in pre-market trading on Thursday.
“With only 2-3 total submissions on each of the past several days, we remain below the trend in attention that has come along with big returns jumps in the past,” Barclays said. “It remains to be seen if WSB posters bring their attention back to TSLA anytime soon.”