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Elon Musk Called Tesla Stock a Bubble – The ‘Dumb Money’ Said BS

Last Updated September 23, 2020 1:53 PM
Aaron Weaver
Last Updated September 23, 2020 1:53 PM
  • Elon Musk tweeted today that Tesla stock is overpriced.
  • After a sudden plunge, investors came running back to TSLA stock.
  • Retail investors who ignored Musk’s comments are in for a world of hurt, just like investors before them.

Retail investors are taking themselves on a Tesla ride. Who’s driving? It used to be Elon Musk.

But Tesla (NASDAQ:TSLA) investors have just gone rogue. They’re no longer listening to their master when he says ‘sell.’ And it’s going cause them a world of hurt.

Elon Musk Makes It Abundantly Clear: Tesla Stock Is Overpriced

If you’re reading this article, you no doubt already know about Elon Musk’s epic Twitter meltdown today. The cartoonish billionaire was tweeting out lyrics from the Star-Spangled Banner, egging on frustrated Americans to defend their freedom.

Elon Musk
You ok, buddy? | Source: Twitter 

He said he was selling most of his physical possessions. And, least shocking of all: he tweeted that his girlfriend Grimes was mad at him.

But this was his most important tweet of the day:

Elon Musk
That’s pretty clear, no? | Source: Twitter 

Elon Musk is saying that Tesla stock is in bubble territory.

His tweet did have some immediate effect, as you can in this image:

Source: Yahoo Finance

Tesla’s stock price dropped more than 11%, erasing $16 billion of value from a single tweet. But dumb money saw this as a sale and quickly proceeded to gobble up the overpriced stock once more.

Dumb Money Ignores the Warning

Tesla stock nose-dived all the way down to around $686, but it’s already climbing back up, shooting to around $712 in about two hours.

Source: Yahoo Finance

A closer look reveals just how popular the stock has been today. At the time of this writing, Tesla was the fourth most popular choice on the mainstream trading app Robinhood in the past four hours.

Robinhood Tesla
Source: RobinTrack 

The only stocks to outpace the electric car company was airline stocks, which are a whole different type of questionable purchase.

TSLA investors are calling the bluff of the man who knows the company better than anyone on the planet. And they’re going to end up regretting it.

This Has Happened Before, And It Didn’t Go Well

Tesla stock is showing the type of volatility and bubble behavior that’s rarely seen in the stock market. To get an accurate parallel of volatility and retail interest, you have to look at a whole different market: cryptocurrency.

In December 2017, popular crypto Litecoin more than tripled in three days. Litecoin founder Charlie Lee went on Twitter to warn investors:

Source: Twitter 

Euphoric investors actually got mad at Lee  for raining on their parade. No matter, in another week, LTC hit its all-time high of $350 a coin. One year later, the coin had dropped down to $23, and foolish investors were left holding an empty bag.

This could be Tesla in a few months. | Source: CoinMarketCap

They’re doing the same thing with Tesla. While Tesla currently has far more real-world applications than Litecoin, the CEO is giving the same message.

And Elon Musk isn’t the only person who thinks his company is overvalued. In February, Barclays auto analyst Brian Johnson said TSLA was “fundamentally overvalued,” and predicted a 65% drop in price. 

Harvard researchers gave an 80% probability for a Tesla stock crash earlier this year.  And that’s not even accounting for the overwhelming evidence that the stock market, in general, is heading for disaster.

Savvy investors know when to get out, and the rest keep piling into Tesla.

Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com. The above should not be considered investment advice from CCN.com. The author holds no investment position in TSLA as of the time of writing.