Tesla: King of Meme Stocks? Putting Retail Investors at Major Risk?

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Final Up to date on: twenty second March 2025, 12:25 pm

There are meme shares after which there are meme shares. A key component of a meme inventory is that it has an enormous quantity of decentralized, retail, normal-folk followers and traders. A scorching social media development is rolling, and the meme inventory advantages. One other component is usually that the inventory worth (or, extra exactly, the corporate’s market cap) is approach out of whack from the corporate’s precise funds.

Let’s take a fast instance of what usually occurs with a meme inventory. Let’s have a look at the 5-year inventory development for AMC, the beloved movie show chain. I like going to the films, and I like AMC, however there’s no denying that AMC has confronted loads of challenges from the rise of streaming, the COVID-19 pandemic, and the continued rise of streaming. Someway, nevertheless, the inventory grew to become a large meme inventory that “benefited from” an enormous inflow of investments in 2021. The next are two graphs which might be the identical — a 5-year inventory worth graph. I simply put the marker in other places to spotlight the inventory worth at these occasions.

As you’ll be able to see, on March 20, 2020, the value of AMC inventory closed at $14.07. Then, a yr and 1 / 4 later, the value had spiked to a excessive of $261.44! Wow, what a achieve! On the time, a standard narrative was about how the meme inventory was successful and proving conventional inventory market analysts and traders fallacious. Dumb previous white-hairs — didn’t perceive how the market was evolving! AMC inventory was going to win, as a result of a large group of obsessively on-line dudes was making it win.

Nevertheless … the inventory is now at $3.04. It seems just like the inventory worth stayed above that preliminary worth of $14.07 for lots longer than many critics of the meme inventory development would have anticipated. I imply, although it clearly declined from June 2021, it was nonetheless comparatively excessive by means of the tip of 2021, and even deep into 2023! Nevertheless, ultimately, the precise funds and enterprise case for the corporate apparently caught as much as it.

What’s all this acquired to do with Tesla, an organization making a wholesome revenue quarter after quarter? The corporate has performed very properly for itself the previous a number of years, and it bought nearly 2 million automobiles two years in a row.

Nicely, Tesla’s P/E ratio continues to be a number of occasions increased than opponents’ (it’s nearly 18 occasions increased than Ford’s, nearly 18 occasions increased than BMW’s, nearly 16 occasions increased than GM’s, about 3.65 occasions increased than BYD’s, and 40 occasions increased than Porsche’s), and it’s market cap ($779 billion) is greater than $100 billion above Ford’s ($39.74 billion), GM’s ($49.55 billion), BMW’s ($54.83 billion), Volkswagen AG’s ($60.79 billion), Honda’s ($52.63 billion), Toyota’s ($299.7 billion), Hyundai’s (36.03 billion), Kia’s ($25.96 billion), Geely’s ($23.64), Xpeng’s ($20.71), and NIO’s ($9.39) mixed.

Is Tesla value greater than all of these firms mixed?

Notably, as it is best to know, Tesla gross sales dropped globally in 2024 in comparison with 2023. To date in 2025, they’ve dropped much more. Tesla robotaxis are a couple of decade late. BYD has handed Tesla in gross sales of full electrical automobiles (and sells a ton of plugin hybrids as properly). Most of those different automakers are seeing their EV gross sales rise whereas Tesla’s decline. The long-held narrative that Tesla’s gross sales would maintain rising quick whereas legacy automakers’ gross sales collapsed, justifying this sort of warped market cap comparability, might be revived — however prior to now year-plus, it’s utterly off the mark.

Tesla’s nonetheless a massively worthwhile firm sitting on a ton of money, however all the traits have been within the fallacious route.

The thought — the justification — is that Tesla is on the verge of breakthroughs in self-driving/robotaxis, robots, and AI. That’s the one justification for Tesla’s tremendous excessive inventory worth and market cap, and Elon Musk has no less than mentioned the identical factor for the previous couple of years. He is aware of that Tesla’s auto enterprise isn’t competing properly sufficient with EV leaders in China, and even with legacy automakers in Europe and the US anymore. It’s all about one other bet-the-company breakthrough.

One might be forgiven for considering Tesla’s performed it earlier than beneath Musk’s management and can do it once more. However I feel we should always understand that the Tesla story and mission was based mostly on some fairly stable info earlier than, and lots of EV fanatics may see the plan enjoying out. EV powertrains had been merely higher at their essence — extra environment friendly, thrilling immediate torque, less complicated — and it was only a matter of driving down battery prices over time whereas scaling up manufacturing and demand. So long as the core know-how adopted the training curve anticipated, EVs would win. Tag on the robust curiosity worldwide in stopping international heating and supporting zero-emissions know-how and also you’ve acquired a reasonably clear path ahead. Sure, it’s exhausting to fabricate issues, it’s a lot more durable to mass manufacture issues, and cars are particularly exhausting to mass manufacture. It was definitely no simple activity to do what Tesla did! Nevertheless, the trail was clear.

Now, the argument is that Tesla’s “Full Self Driving” ought to have the option to have the ability to get to robotaxi functionality forward of others simply with cameras and AI — no lidar, no radar, no downside. Others within the subject have disagreed for years, and there are even robotaxis which have been working for years that maintain increasing their territory. However with just a little extra of a breakthrough, the dream is that Tesla will have the ability to flip a change and switch tens of millions of buyer automobiles into robotaxis in a single day. Additionally, regardless of there being loads of competitors within the robotics market, there’s a hope and a want that Tesla is much forward of the competitors and can have the ability to make a multi-billion-dollar enterprise out of its tremendous particular robots.

Perhaps that’s all true. Or perhaps Tesla has simply become the king of meme shares — supported considerably deceivingly by its profitable (however dwindling) electrical automobile enterprise, however with tens of millions of traders mainly betting on Tesla attaining some minor miracles in AI and robotics.

Tesla inventory has been crashing in 2025 as the corporate’s disappointing gross sales numbers have come out and Elon Musk’s loopy political antics have taken heart stage. Nevertheless, whilst there’s been an enormous selloff, retail traders have piled into the inventory to a notable diploma. A headline yesterday from Bloomberg said, “Tesla’s Retail Fans Buy the Stock at a Pace Never Seen Before.” Hmm…. “Tesla Inc.’s stock is in a freefall. Its sales are plunging around the world. Even its most avid Wall Street bulls are turning cautious. But one group is buying the electric-vehicle maker’s shares like never before: CEO Elon Musk’s fans,” the article begins. That sounds fairly meme stock-y to me. What do you suppose?

“The corporate has lengthy had an ardent fan base of particular person traders who grasp on Musk’s each phrase on X, the social-media platform he owns. They analyze Tesla in nice element in on-line boards and largely perform as a hype crew for the inventory.

“But their current level of enthusiasm is staggeringly high, even by recent historical standards. Individual investors have been net buyers of Tesla shares for 13 straight sessions through Thursday, pumping $8 billion into the stock, retail trading data from JPMorgan Chase’s global equity derivatives strategist Emma Wu shows. That’s the biggest inflow over any buying streak since 2015, which is as far back as the data goes.”

Wow.

In fact, this has occurred whereas the inventory has been rolling off a cliff. “What makes the retail buying notable is Tesla’s share price has sunk 17% over this time, wiping out more than $155 billion from its market value.”

These of us who’ve adopted the inventory for years know the chorus properly: “Buy the dip!!” It’s at all times only a dip and a possibility to purchase! The inventory will rise for years to come back, however then when there are important drops that apparently make no sense, it’s simply an apparent shopping for alternative! “Diamond hands! Buy the dip! Don’t lose faith! The divine and immortal Elon will always win!” Clearly, many retail traders are all-in on these arguments.

So long as the corporate is earning profits, there’s nothing to fret about anyway. It’s nearly ready out the unhealthy press. As we’ve seen even with AMC, even utterly illogically believing in an organization regardless of market dynamics and its out-of-date enterprise mannequin can prolong for an absurdly very long time. There’s nonetheless an opportunity Tesla gross sales rebound with the brand new Mannequin Y and one other new mannequin. Maybe a few of the different enterprise divisions begin to make some huge cash, too. Nevertheless … if Tesla gross sales and funds proceed to go within the fallacious route, there’s a stable risk that Tesla income shift to Tesla losses. If that occurs, what subsequent?

If Tesla is the king of meme shares, its reign might be cheered for years, however it may nonetheless find yourself seeing the destiny of different meme shares, proper? The corporate clearly has loads of the qualities of a meme inventory. It’s been referred to as that numerous occasions for years for a cause. It could even be a “meme company,” and benefiting from that, however humorous cat movies used to rule the web — after which folks acquired extra keen on different issues and algorithms modified. Blackberry used to rule the mobile phone market. Kodak was once the king of images. I do know, these comparisons have been used loads of occasions to forecast Tesla’s future in comparison with legacy automakers’. However what if Tesla is extra of a Blackberry than an Apple? What whether it is certainly being handed up by sooner innovating, extra neatly managed opponents?

What if the largest cause for its huge market cap has at all times simply been that it’s probably the most magnificent meme inventory in historical past?

Aspect be aware: We’ve additionally now acquired a trump appointee, U.S. Commerce Secretary Howard Lutnick, telling folks “Buy Tesla” (an illegal promotion of a private company by a federal employeein fact) and claiming “It will never be this cheap.” Nicely, when have Trump World associates ever been identified to commit crimes, commit fraud, or be tremendous fallacious? It’s certainly not a determined plea to save lots of his personal butt, proper?