'Financial analyst deems Tesla stock as severely undercapitalized'

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【Summary】Tesla's stock has been surging this year, but financial analyst Meet Kevin believes it is "heavily under-capitalized" by institutions. Only 35% of large-cap active funds hold TSLA, with low allocations. Kevin expects sentiment to change, leading to more institutional investors buying TSLA and boosting their holdings. If this happens, TSLA could experience a significant increase in buying pressure.

FutureCar Staff Sep 12, 2023 11:23 PM PT

'Financial analyst deems Tesla stock as severely undercapitalized'

As capital markets rebounded from their 2022 bottoms, Tesla's stock has seen a remarkable surge this year, more than doubling in share price since January 1, 2023. This surge can be attributed to a resurgent market, a strengthening electric vehicle (EV) industry, and robust earnings reports, all of which have rewarded investors.

However, the story may not end here. On September 11, renowned financial advisor Meet Kevin highlighted important factors that could potentially fuel Tesla's stock even further in the future. One of the key factors mentioned was that TSLA remains "heavily under-capitalized by institutions," according to Kevin.

In a report by Bank of America, it was revealed that only 35% of large-cap active funds hold TSLA, and those that do have relatively low allocations. This is in stark contrast to other companies like Microsoft, where 90% of large-cap long-only funds have holdings, with allocations that are overweight by 20-30%. Kevin emphasized that Tesla has the worst of both worlds: a low number of funds holding it and low allocation within those that do.

Kevin expects the sentiment towards TSLA to change among funds, which could lead to more institutional investors jumping on board and increasing their allocations to the automaker's stock. If this expectation comes to fruition, Tesla could experience a significant increase in buying pressure.

At the time of publication, TSLA shares were priced at $273.58, following a 10% surge in the past 24 hours due to Morgan Stanley's substantial price target hike. The stock has gained over 6% in the week, 13.1% in the month, and more than 130% year-to-date.

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