Mott Capital says that Tesla (Nasdaq: TSLA) could be in for a huge quarter of earnings thanks to its wise $1.5 billion bitcoin investment.
Elon Musk’s electric vehicle empire is set to report its first-quarter results after the markets close today and a “monster earnings beat” might happen, according to Mott Capital’s Michael Kramer.
“The reason is simple, bitcoin rose dramatically during the first quarter, and those unrealized gains will show up under other income, Kramer said as cited by MarketWatch today.
He added, “So you are wise to factor that into understanding how strong results are.”
However, Kramer cautioned with a possible 'bear flag’ given the recent drop in the price of bitcoin. Last week, bitcoin suffered its biggest weekly drop in more than a year. While the price of bitcoin was up 7% intraday at more than $53,000, he sees “another sharp drop” coming. The next level of bitcoin prices could range from $42,000 and $43,000, Kramer said.
When it comes to Tesla, I’ve been skeptical of the company when it comes to the long-term. I did, however, note in early March to buy the stock when it was on the pullback trading just under $600 per share. Now Tesla is trading about $150 higher from those levels.
I’m cautious about Tesla due to its wild valuation when compared to other auto giants like Toyota (NYSE: TM), which sell way more cars; Tesla’s market capitalization is more than triple the Japanese giant. But when there’s a dip opportunity you take it--especially in a hot isector like the EV soace.
Kramer noted that Tesla’s stock price could potentially surpass $800. However, “once it breaks $700, it is likely the start of a rather steep and prolonged drop,” according to Kramer.
Perhaps Tesla’s stock gains big this week on potentially strong earnings. But I would be careful and put a stop loss limit on the stock at $750 per share.
The next few days will be a busy one for Wall Street. Following Tesla, big tech firms including Apple (Nasdaq: AAPL), Microsoft (Nasdaq: MSFT), Facebook (Nasdaq: FB), and Amazon (Nasdaq: AMZN) are set to report earnings.