We recently published a list of 11 Best Reddit Stocks to Invest In. In this article, we are going to take a look at where Tesla, Inc. (NASDAQ:TSLA) stands against other best Reddit stocks to invest in.
In finance, cognitive biases tend to affect investor decision-making, says Austin Barbosa, CFA, senior analyst in Client Portfolio Management at iA Global Asset Management. Among such biases, confirmation bias is particularly pervasive. This bias refers to the inclination to favour information aligning with pre-existing beliefs while, at the same time, also discounting contradictory evidence. Confirmation bias gets exacerbated by echo chambers on social media platforms, in which algorithm-fueled content personalization results in an environment reinforcing investors’ views.
To provide a brief context, an echo chamber in social media means an environment in which people are mainly exposed to opinions, information, and views which reinforce existing beliefs. Renowned social media platforms such as X (formerly Twitter) and Reddit remain mainly prone to such dynamics, primarily among younger retail investors, which affects market dynamics.
Social Media’s Impact on Financial Decisions
Interplay between confirmation bias and echo chambers resulted in significant financial phenomena over the past few years, says Barbosa. One critical point in this regard focuses on GameStop — the rally of 2024. This stemmed from the re-surfacing of Keith Gill on Reddit and X after a break of ~3 years. The return of Keith resulted in a sudden increase in GameStop’s stock price, increasing by over 70% in a single day and touching a peak of ~$31, only to fall by more than 50% in just a few days, as per Barbosa.
Reuters, while referring to the comments made by Steve Sosnick (Chief strategist at Interactive Brokers), highlighted that this is a characteristic of a pattern which has been evolved in GameStop’s trading — the stock’s price tends to increase, then after it settles down or witnesses a correction, Gill’s persona again emerges via social media post.
Even in the cryptocurrency market, social media platforms such as X and Reddit resulted in speculative hype, mainly during bull runs, says Barbosa. Several market enthusiasts bought into projects such as Cardano (ADA) without understanding the risks. Then Cardano saw a significant decline, falling over ~40% from its 2024 peak, highlighting uncertainty and volatility.
Austin Barbosa, CFA believes that platforms such as X and Reddit also provide significant value to stay informed. While X provides access to breaking news and expert opinions, Reddit enables in-depth discussions and diverse community insights. Instead of relying on a single subreddit, it is of utmost importance to explore several other finance-oriented communities which provide different viewpoints. If an investor engages with diverse perspectives, it will help prevent the pitfalls of group thinking, providing a broader understanding of overall market dynamics. It is important to supplement the information sources through trusted and reliable financial news outlets, and market research reports.
Our Methodology
To list the 11 Best Reddit Stocks to Invest In, we sifted through Reddit threads and narrowed our list to the 11 best stocks by selecting the trending ones. Next, we chose the ones that are popular among hedge funds. Finally, the stocks were arranged in ascending order of their hedge fund sentiments, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Is Tesla, Inc. (NASDAQ:TSLA) the Best Reddit Stock to Invest In?
An executive of the company viewing a portfolio of investment grade municipal obligations.
Tesla, Inc. (NASDAQ:TSLA) is engaged in designing, developing, manufacturing, leasing, and selling EVs, and energy generation and storage systems. Cowen analyst Michaeli gave a “Buy” rating on the company’s stock, setting its price objective of $388. While there are challenges, the list of game-changing level catalysts throughout EV, AV and robotics remains strong enough to tilt risk/reward favorably. Elsewhere, Morgan Stanley’s Adam Jonas remains optimistic about Tesla, Inc. (NASDAQ:TSLA)’s potential in the evolving landscape of AI and robotics. The analyst opines that this can offset its struggles in the EV market.
Reuters reported that Tesla, Inc. (NASDAQ:TSLA) has been fetching a valuation far above that of the world’s leading automotive and technology firms, considering the standard financial metrics. This is because several investors and analysts believe that Tesla, Inc. (NASDAQ:TSLA) is not really a car company at all, but an AI-pioneer that can unleash a revolution in robotaxis and humanoid robots. The company continues to focus on innovation and product development in a bid to maintain a competitive edge.
Baron Funds, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“Tesla, Inc. (NASDAQ:TSLA) designs, manufactures, and sells electric vehicles, related software and components, and solar and energy storage products. Shares rose on growth in the energy segment, the promise of new model launches in 2025, and increasing investor confidence in Tesla’s AI initiatives. Despite macroeconomic challenges, delivery data in major markets like China have shown considerable improvement. The energy and automotive segments demonstrated stronger-than-expected profitability. Tesla also expanded its advanced computing center in Texas, released improved version of its software-enhanced driving solution, and is set to launch new mass market vehicles years after the initial rollouts of Models 3 and Y. Expectations of deregulation under the incoming administration point to the potential acceleration of new technology rollouts, which could enhance Tesla’s leadership position in real world AI and bolster investor confidence that Tesla will benefit from these large and attractive growth opportunities.”
Overall, TSLA ranks 4th on our list of best Reddit stocks to invest in. While we acknowledge the potential of TSLA as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than TSLA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
