Elon Musk and Tesla’s truck prototype.
Internet posting activity rather than actual financial performance has an outsized impact on Tesla share price, according to a report from Barclays Capital Inc.
“We have learned that social media memes can matter more for TSLA share performance than actual financial metrics, fundamentals or (dare we say) valuation,” the auto industry analysts at Barclays wrote in a report to clients Tuesday.
The analysts, along with the Wall Street investment bank’s Investment Sciences team and dug into the data on Reddit r/wallstreetbets, or WSB.
“We see that big upticks in submissions about Tesla have been predictive of stock returns a few days later. In the model we think is most appropriate, a swing up of 7 or more submissions today over yesterday has been predictive of outsized returns in TSLA stock tomorrow,” the analysts found.
They conclude the following:
- There is a statistically significant relationship between the number of returns and the absolute number of posts one and two days earlier. But autocorrelation in the posts also means that the measures of significance are less reliable than we would prefer to depend on.
- There is also a statistically significant relationship between changes in post counts and following days’ returns. This is more likely to be a valid statistical test, and using a model based on it provides a more consistent returns signal than a model that uses the number of posts.
- A closer examination of the details gives us some comfort that the statistical evidence is finding a real relationship:every peak higher than 10 submissions went along with positive returns, and the relationship between post-spikes quintiles and returns kept the same shape even when the top peaks were removed.
But they cautioned betting on Tesla stock based on Reddit posts.
“The situation has been so dynamic that there are simply too few examples to be confident of a stable process between WSB posts and TSLA returns. Even more than usual, past results might not predict future performance,” they said.