Tesla CEO Elon Musk is once again pumping the market via Twitter as he sent Etsy stock soaring on Tuesday morning.
Look, we’ve been here before, and I apologize for yet another warning-esque post this week, but the market has become a mad-house of late.
Yesterday, we saw Etsy (NYSE: ETSY) stock soar premarket after Elon Musk tweeted “I kinda love Etsy”. The man has no affiliation with the e-commerce firm and does not own any stake in it, as far as we know. The tweet was simply a kudos from a happy customer who had bought a gift for his dog on the platform.
But we all know what happens when Elon Musk tweets about publicly-traded companies though — or about companies with the same name as public ones.
Between this and the ongoing GameStop saga that we covered yesterday, we really should be concerned about whether this madness is just the dreaded ‘new normal’?
What does this mean for Etsy?
There has been no major update from Etsy, nor was it making any moves premarket before Musk pressed send on that Tweet, causing its stock to open up 8% before closing down 2.1%. This one-day rollercoaster of its stock is simply due to Elon Musk’s cult-like following blindly investing in anything he mentions. There is some irony here in that Etsy was added to the S&P 500 back in September instead of Tesla, which irked many investors at the time. I guess there are no hard feelings after Tesla was eventually added in December anyway, making Musk the world’s richest man.
Getting back on topic, the Etsy situation yesterday is yet more proof of the increasingly short-term nature of the stock market, one where algorithms can dictate prices and day traders using services like Robinhood can make a quick buck. To use a term you’re probably sick of me saying this week though:
This behavior is unsustainable.
Investing in a company because Elon Musk is tweeting about it is not a smart strategy, and hopping on the bandwagon for such rallies only sets you up to lose out when traders eventually cash in on their profits.
Of course, a company like Etsy is nothing like GameStop, Macy’s, or other poor-performing companies that have large short-seller followings. Etsy has strong fundamentals, with analysts forecasting that its sales nearly doubled in 2020 and that earnings per share soared more than 175%.
You should still be careful of these events though. Stick to the fundamentals and ignore the tech CEOs and their Twitter accounts. After all, if Elon Musk told you to jump off of a bridge, would you do it?
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MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.