The analysts at a group that uses machine learning and natural language processing to analyze the market predict a massive correction in TSLA's price per share that will also sadden r/wallstreetbets careful and pragmatic traders. In New Construct's model, TSLA shares many characteristics with "zombie stocks," poorly managed companies burning cash at an alarming rate, and serves as a bellwether for the sector. Musk's ability to raise capital keeps the EV carmaker and carbon credit trader from falling into the role of ZombieKing of the NASDAQ.
New Constructs does not define Tesla Inc. TSLA as a "zombie stock," citing CEO Elon Musk's ability to raise capital, but does see the electric car manufacturer as a bellwether for the sector. "It shares many of the common characteristics of a zombie stock, such as an outrageous valuation and high cash burn," wrote Trainer. "We believe Tesla's unrelenting share price rise over the past three years – where investors completely ignored company fundamentals – inspired the birth of many of today's zombie stocks."
The company's stock was trading around $220 on Monday, an increase of over 1,000% compared to three years ago. But Trainer feels that Tesla is at risk of falling more than 80% to $25 a share.
Tesla's stock has fallen 37.6% in 2022, outpacing the S&P 500 Index's SPX decline of 22.7%.
"Its valuation remains nosebleed high because the cash flow expectations baked into the stock price are unreasonably optimistic," Trainer wrote. "Our message to investors is to take profits in Tesla and avoid zombie stocks at all costs."
The group lists a number of popular meme stocks in their list of zombies:
New Constructs recently added cloud-based communication company RingCentral Inc. RNG to its list of "zombie" stocks. Other companies on the list are Freshpet Inc. FRPT, Peloton Interactive Inc. PTON, Carvana Co. CVNA, Snap Inc. SNAP, Beyond Meat Inc. BYND, Rivian Automotive Inc. RIVN, DoorDash Inc. DASH, Shake Shack Inc. SHAK, Chewy Inc. CHWY, Uber Technologies Inc. UBER, Robinhood Markets Inc. HOOD, Tilray Brands Inc. TLRY, Affirm Holdings Inc. AFRM, SunRun Inc. RUN, Blue Apron Holdings Inc. APRN, and meme stocks AMC Entertainment Holdings Inc. AMC and GameStop Corp. GME.