Renowned investor Bill Gross has expressed concerns about the behavior of Tesla in the market, likening it to a speculative play favored by retail investors. Gross highlighted the sagging fundamentals of Tesla coupled with its unprecedented price action, indicating a similarity to meme stocks. He views this trend as a concerning sign of the times, where many companies are being pumped up by hype only to be dumped shortly after.
Despite Gross’s reservations, Tesla has been on an impressive 10-day winning streak, with its stock surging by 43.6% since June 24. This surge was primarily driven by Tesla’s second-quarter vehicle production and deliveries numbers that surpassed analysts’ expectations. The company’s strong delivery report seemed to have fueled investor optimism, leading to the significant price appreciation in a short period.
Drawing parallels between Tesla and other meme stocks like Chewy, Zapp, and GameStop, Gross pointed out the volatile nature of these companies. Chewy gained meme status after notable online personality Roaring Kitty invested in the pet retailer, reminiscent of the GameStop mania in 2021. Gross’s reference to GameStop and AMC options trading further underscores the speculative frenzy that surrounds certain stocks in the market.
While Tesla has seen a notable increase in its stock price, Gross remains skeptical about the sustainability of this growth. He believes that the current market environment is rife with speculative plays driven by short-term gains rather than underlying fundamentals. Despite Tesla’s recent rally, its performance lags behind the S&P 500, signaling a potential disconnect between the company’s stock price and broader market trends.
The rise of Tesla as a meme stock raises important questions about the dynamics of the current investment landscape. While some investors may view Tesla’s surge as a sign of optimism and innovation, others, like Bill Gross, warn of the dangers of speculative trading and market hype. As the debate continues, it is essential for investors to carefully evaluate the risks and rewards associated with such volatile stocks to make informed decisions in an ever-changing market environment.