Tesla (TSLA) Has Made a Volatile Stock More Volatile with Bitcoin Purchase, However Longer-Term Value is in EVs - Wedbush

Wedbush analyst Dan Ives has taken note of the most recent selloff in Tesla (NASDAQ: TSLA) stock. The price action is trading over 5% lower in pre-open below the $700 mark. According to Ives, selling is being driven by two factors.

First, Tesla’s buying of Bitcoin (BTC) has made some investors look for the exit door amid higher volatility. Tesla stock is trading in a volatile manner that is driving the emotional bull/bear debate around the name.

“From a high level, its $1.5 billion which is a small amount of the company's overall cash position and in theory does not move the needle for Tesla. However, perception is reality on the Street and by Musk and Tesla aggressively embracing Bitcoin (from a transactional perspective as well), investors are starting to tie Bitcoin and Tesla at the hip. While Tesla on paper made roughly a $1 billion on Bitcoin in a month that exceeded all its EV profits from 2020, the recent 48 hour sell off in Bitcoin and added volatility has driven some investors to the exits on this name in the near-term,” Ives wrote in a memo sent to clients today.

“We continue to believe the Bitcoin move was a strategic one for the long-term and will have a ripple impact as Square, Mastercard, Microstrategy and now Tesla embrace Bitcoin. That said, Tesla is an EV play entering the golden age of EVs and there is a lingering worry that the Bitcoin sideshow could overshadow the overall EV growth story playing out for Tesla in 2021 and beyond in the eyes of the Street.”

Secondly, Tesla recently stopped taking new orders for the lowest-priced version of its Model Y. A week earlier, the EV giant cut the price of its Model Y standard range SUV, from $41,990 to $39,990. Some investors believe Tesla is experiencing weak demand amid stronger competition.

“We never viewed this Model Y version as moving the needle and continued price cuts has been part of the overall Tesla strategy over the past year and we do not expect that to change. This speaks to a broader point that with Detroit stalwarts GM and Ford (among many others) now going all in on EVs over the past month many investors have asked us will this change the competition landscape for Tesla,” Ives commented.

Overall, Tesla investors should focus on the unit sales for March and June and less on Bitcoin. Ives stresses that quarterly sales numbers will “drive the Tesla story upward going forward with China front and center and not Bitcoin.”

“That said, its "buckle up the seat belt time" again for Tesla's stock with more volatility on the horizon,” he adds.

Ives rates TSLA with a “Neutral” rating and a price target of $950.00 per share.

For an analyst ratings summary and ratings history on Tesla click here. For more ratings news on Tesla click here.

Shares of Tesla closed at $679.04 yesterday.

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