Tesla stock is showing signs of 'retail exhaustion' as it undergoes a historic sell-off, research indicates

Tesla CEO Elon Musk steps into a a Model X in 2015.Justin Sullivan/Getty Images

  • Retail investors are beginning to reduce purchases of Tesla as the stock undergoes a historic sell-off.

  • “We are seeing the first signs of retail exhaustion in TSLA,” the firm said in a weekly update published Thursday.

  • Investors loaded up on the shares in 2022 as the price continued to move lower.

Retail investors are beginning to reduce purchases of Tesla shares as the price suffers from a persistent sell-off that drove the stock’s worst ever annual performance in 2022 and shows little sign of letting up in the new year.

“We are seeing the first signs of retail exhaustion in TSLA,” said Vanda Research in a weekly update published Thursday.

Retail flows on Wednesday ended at $37.8 million but were “significantly weak” even as the EV maker’s stock found a respite from recent losses and surged by 5.1%.

The “subdued buying indicates that a significant share of retail traders seized yesterday’s rebound to exit TLSA positions,” wrote Marco Iachini, senior vice president of research at Vanda. The firm’s VandaTrack tool monitors retail investor activity in more than 9,000 stocks and ETFs in the US.

“To put things into context, retail investors have bought more Tesla stock over the last 6 months ($13 billion) than they have done overall in the 60 months prior, meaning that this group is definitely feeling the pinch of the recent months’ fall to $113/sh,” he said.

Tesla stock was down during Thursday’s session, by 3% at $110.10 each. The price is lower than $123.18, where it wrapped up in 2022. The shares tumbled by 65% in 2022, with its worst-yearly loss on record, erasing more than $700 billion in market value.

While Tesla’s stock price was under pressure last year, retail investors loaded up on the shares. Vanda’s research showed cumulative net retail purchases soared by more than 420% to $15.41 billion, edging out Apple as the most-purchased single stock by individual investors in 2022.

Some investors and analysts said Tesla CEO Elon Musk’s focus on his newly acquired Twitter and his multi-billion dollar sales of Tesla stock has hurt the car maker’s shares.

Musk has pushed back on those assertions, blaming the Federal Reserve‘s aggressive pace of rate hikes for driving down Tesla’s valuation.¬†Tesla’s market cap of about $349 billion is well off its $1.2 trillion valuation at the start of 2022.

Chart of retail purchases of Tesla stock from 2022 to early 2023.Vanda, Bloomberg

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