New reports suggest that Tesla (NASDAQ:TSLA) has an unexpectedly substantial money-maker under its roof, and one that has nothing at all to do with electric cars. As it turns out, the Wedbush report notes, Tesla has actually made more money this year on investing in Bitcoin than it has in making and selling electric cars.
A Surprise Crypto Booster
A Securities and Exchange Commission (SEC) filing from back on February 8, when examined closely, noted that Tesla had purchased $1.5 billion worth of Bitcoin. Based on rates at the time, and assuming that Tesla still has all the Bitcoin it purchased back then with that $1.5 billion, Tesla should have realized a $930 million profit from said purchase because Bitcoin has been climbing frantically ever since.
Should these numbers ultimately hold true, that would mean that Tesla actually made more money on its Bitcoin purchases than it did selling cars in 2020. This is a point supported by recent word from CEO Elon Musk himself, who recently noted that “Having some Bitcoin, which is simply a less dumb form of liquidity than cash, is adventurous enough for an S&P 500 company.”
Musk was also seen offering up some Twitter-based support for other cryptocurrencies. One tweet in particular, “Dojo 4 Doge”, was suggested to be in reference to Tesla's own supercomputer, which is nicknamed “Dojo”. On Reddit, meanwhile, some noted that Tesla's hardware team was working on a neural network chip named “Dojo” that would be part of the array of hardware that lets a car drive itself using cameras and radar systems as external sensors.
So What About Tesla Itself?
The revelation of Tesla's substantial Bitcoin hoard is likely shaking a lot of investors, but our latest research notes that analysts aren't rushing to put a lot of new capital behind it. Tesla is actually one of the lowest-rated stocks we know of, and also one of the most downgraded stocks around, which isn't much of a surprise given the tear it was on just a few months ago.
Tesla has held a consensus figure of “hold” for the last six months, and though there was a substantial pop-up in sentiment toward the bullish side three months ago, it's been turning increasingly bearish ever since. Six months ago, the company had 10 “sell” ratings, 18 “hold” and five “buy” ratings. Three months ago, that shifted, in a big way. The company gained a “sell” to 12 total, but lost six “hold” ratings, bringing it to 12, and gained five “buy” ratings, bringing it to 10 total. It also gained a “strong buy” rating. Another massive shakeup hit a month ago as the company went to 12 “sell” ratings, 13 “hold” ratings, and eight “buy” ratings, losing the “strong buy” rating in the process. Today, we're now at 12 “sell” ratings, 14 “hold” ratings, and six “buy” ratings, which is the most bearish picture seen in the last six months.
The price target, meanwhile, has only increased, but has represented downside potential for the last six months. Six months ago, it was sitting at $172.34. Three months ago, it shot up to $271.46. Another hefty jump landed a month ago to $312.40, and today, we're sitting at $324.92. Given that Tesla currently trades at $742 even as of this writing, it's worth wondering if the price targets are even worth considering here.
A War Chest's Value
Granted, the revelation that Tesla may have made more money investing in cryptocurrency than it did selling cars in all of 2020 is likely to come as a blow to investors. It's not the first time a company has made headway with a timely cryptocurrency investment; MicroStrategy (NASDAQ:MSTR) frequently popped up on “biggest movers” list thanks in large part to its substantial Bitcoin holdings.
It's worth noting here that a large Bitcoin hoard really isn't much different than a large cash hoard. Sure, it might be a bit less liquid—Musk's remarks about “dumb” notwithstanding, good luck paying employees with Bitcoin, let alone any utility bill or other day-to-day expense—but it's only somewhat less liquid. It's almost like a company holding gold or negotiable securities; it's an asset, and that asset can be useful when it's needed. Moreover, thanks to the recent run-up in prices, it's also an asset that gets Musk and Tesla extra media access, which means more indirect marketing for Tesla.
Tesla has a good-sized war chest, and one that's gaining in value as the price of Bitcoin continues its rise. A war chest, however, is really only valuable when it's being used, so it's worth watching to see what Tesla does with this big new slug of cash that really matters. If it diversifies its business or improves its product line, that could be the start of Tesla's next big leg up. If it just lets it sit until the bottom falls out, however, that could be a real disaster for the company.
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