Tesla (TSLA) surged 10% this morning, fueled by money from retail investors on President Trump, White House officials, and CEO Elon Musk pumping the stock.
It is sending Tesla’s price-to-earning ratio back up to record highs, which Musk warned could lead to the stock crashing “like a soufflé being smashed by a sledgehammer.”
JPMorgan said that data shows retail traders are pouring into Tesla’s stock, with $7.3 billion flowing in over the past two weeks.
It came after Tesla’s stock crashed 50% from its December high and several efforts to pump it back up.
First, it started with President Trump holding a Tesla infomercial at the White House. Then, the US Secretary of Commerce recommended buying Tesla’s stock in a TV interview – something government ethics experts said broke the law.
Finally, CEO Elon Musk held a public all-hands meeting at Tesla for the first time last week. During the meeting, Musk plead for people to “hang on to their Tesla stocks.”
The pumping efforts helped Tesla’s stock surge 10% this morning – though it is still down more than 30% year-to-date:
This morning’s surge resulted in Tesla’s price-to-earning ratio surging back to 133 based on Tesla’s current earnings, which Wall Street is now expecting to be cut in half this quarter as the automaker’s deliveries are crashing. In turn, it should result in Tesla’s price-to-earnings ratio doubling.
The last time Tesla traded at these levels, Musk warned Tesla employees that the stock would get crushed “like a soufflé being smashed by a sledgehammer” if it didn’t show profit growth.
Tesla’s net income crashed 50% last year on lower car deliveries and lower gross margins as Tesla tried to avoid further decline in demand with bigger discounts and subsidized financing rates.
While most of Wall Street still believes that Tesla will go back to growth in 2025 with a consensus of 1.9 million vehicle deliveries, they are starting to adjust that down due to the clear demand issues Tesla is facing this quarter.
We reported earlier today that Morgan Stanley analyst Adam Jonas, who has historically been one of the most optimistic Wall Street analysts on Tesla, has slashed his 2025 delivery estimate from 1.9 to 1.6 million units.
Electrek’s Take
I am not one to predict Tesla’s stock movements. It is one of the most unpredictable stocks out there since it is fueled by people believing Elon’s lies.
However, I do see a potentially dangerous scenario here.
These recent clear stock pumps from the Musk/Trump partnership have evidently worked with retail investors as per JPMorgan’s data. It prevented the stock from going too low before Q1 delivery and earnings results.
But the results are coming and Tesla will likely have the lowest deliveries in the last 10 quarters and one of the worst earnings performance in years – leaving those retail investors holding the bag.
Unless, that’s already priced in and people are OK with Tesla’s price-to-earnings ratio shooting back up to 200-300 – even though Musk himself warned about those levels not being sustainable.
In May of 2020, Musk said that Tesla’s stock was too high and the company was still growing at that time:
Now, Tesla’s stock is trading 6x higher, and the company is not growing anymore. At that time, Musk was not scared to say that the stock was too high because he still saw the company grow and believed Tesla was on the verge of solving self-driving.
5 years later, he is now telling people not to sell at 6x the price because he knows Tesla is not growing delivery volumes like it was in 2020 and he made Tesla pivot on Full Self-Driving because the HW3 and HW4 solutions didn’t work.
Again, I’m not predicting where Tesla’s stock will go. I have no idea, but I am afraid that all this pumping could lead to those retail investors holding the bag.
FTC: We use income earning auto affiliate links. More.
