This report will be analysing Tesla’s stock for the week commencing 28th December 2020. This will be done using StockGeist, a platform that determines the sentiment towards a stock in real-time, by applying natural language processing to the latest news updates and social media posts. All times given are in GMT+0.
Tesla: an American electric vehicle and clean energy company based in Palo Alto, California. Tesla’s current products include electric cars, battery energy storage from home to grid-scale, solar panels and solar roof tiles, as well as other related products and services.
Analysis – Final Days of 2020
Its recent recognition in the media has motivated many day-traders to join the bandwagon throughout 2020. A noticeable achievement includes Tesla entering the S&P 500, which was announced on November 17. Being added to the S&P 500 or any other major indexes often create bullish pricing momentum. As expected, Tesla prices soared 46.3% in November. On the day of the announcement, Tesla stock shot up to 460 at 14:30 after closing at only 407 the previous day. Accompanied by its third-quarter results in October, the November rally for broader market and The Santa Claus Rally, Tesla share price continued to rise in the final days of 2020.
In the days leading up to New Year’s Eve, the media wrapped up 2020 for Tesla through numerous mentions about electric vehicles being the future. In addition, news on Tesla close to hitting 500,000 sales in 2020 further contributed to an increase in share prices despite speculation from bear investors. These activities are reflected in StockGeist’s informative message figures, which eventually explain how Tesla managed to start 2021 in a positive way while others are experiencing falling share prices.
On 30th December 2020, at 13:00 – 14:00, ahead of the US stock market opening time, the gradual increase in positive and neutral informative messages globally on Tesla forecasted a rise in its share price. Total informative messages increased from 133 at 13:00 to 335 at 14:00, the majority being positive and neutral messages. This trend continued throughout the day before peaking at 19:00 with 1064 informative messages, 82% were positive and neutral. Evidently, Tesla’s share prices shot up from 665.59 and peaked at 669.36 that day.
Similarly, the emotional messages displayed on StockGeist followed the same trend. On 30th December 2020 at 14:00, 150 emotional messages were recorded with 86% being positive and neutral. This number peaked at 19:00 where 80% of 772 messages were positive and neutral. The following day, the peak happened earlier at 16:00 where 74% of 838 messages were positive and neutral. These suggest that confidence was high for Tesla’s stocks, which further contributed to its increase in the final days of 2020.
The same theme continued through to the early days of 2021. This momentum allowed Tesla to push through the negative market at the start of January.
Accuracy Test – 2021
Period: week commencing 11.01.2021
Time: 15:00 – 20:00
For the opening days of 2021, share prices across most US industries fell. The Dow Jones fell as much as 2% and the majority of manufacturing firms lost up to 10%. However, Tesla stock shot up over 4% with the number of negative informative messages failing to exceed 30% for the first week of 2021. This is an explanation to why Tesla has been so successful in fighting against market pessimism. Through leveraging market sentiments through Twitter, YouTube, etc, Tesla is able to leverage a positive media outlook to keep its share prices rising.
However, as January progresses, negative sentiments on Tesla increased. The analysis below will focus on how share price moved with this change in sentiment.
The accuracy test shows that positive informative messages on Tesla outnumbered the positive emotional messages. At the same time, negative informative messages outnumbered negative emotional messages. Also, it can be observed that positive messages now occupy a smaller proportion of total messages, suggesting that the market is not reflecting positively on Tesla as it did last month.
In the week commencing January 11th, when there is a 10% increase in positive informative messages, there is a 38% chance of share price increasing. Similarly, a higher relative number of negative messages also resulted in a higher probability of stock price decreasing. The same concept also applies to emotional messages.
These messages give an explanation as to how Tesla was able to survive the opening days of 2021, where both consumer sentiments and the media were reflecting positive thoughts on Tesla’s stock during the final days of 2020, giving it momentum into the new year. However, as January progresses, the number of negative messages slowly took up more proportion of total messages, causing its share price to drop from 880.36 on January 8th to 840.82 on January 19th.
It is clear that informative and emotional messages have accurately predicted the direction of Tesla stock. As evidence, the falling Dow Jones and share prices across US markets at the start of 2021 are direct contrasts to Tesla’s direction. Although this is only a representation of the past week, future investors could refer back to examine consumer sentiments to direct their investment for Tesla, where informative and emotional messages have proven to be an accurate predictor of share price movements.
Tesla has received a lot of positive momentum in recent days. Therefore, looking forward, it is worth considering other StockGeist metrics like word clouds, fundamentals or ranking to get a better grip on Tesla’s direction when it is less stable.
With the current global climate, Tesla is currently standing strong at above 840 and is highly resilient to the negative forces in the market. The sales of its Model S are near 500,000 while revenue and share prices were increasing repeatedly throughout 2020. Concerns about its competitions like Apple or Audi in the electric-motor industry can only be tested through times. Other concerns about Tesla’s sales and product qualities are the same as they were before, and Tesla has repeatedly proven the bears and the industries wrong through its share prices. The release of the Cybertruck in 2021 will further reinforce Tesla’s standing in the market, giving Tesla’s investors higher confidence. Despite the recent increase in negative sentiments, the outlook for Tesla in 2021 would be more positive than negative.