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After the company’s $1.5 billion buys, Tesla’s stock price is now ‘heavily dependent on the fate of Bitcoin

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  • Wedbush analyst Dan Ives said in a note on Tuesday that Tesla’s $1.5 billion acquisition of bitcoin last month means the company’s portfolio is “heavily tied” to the digital currency.
  • Tesla’s stock has fallen 21% after the company announced its bitcoin purchase earlier this month.
  • “With more uncertainty on the horizon, it’s ‘buckle up the seat belt time’ for Tesla’s stock,” Ives said.

Wedbush analyst Dan Ives said in a note on Tuesday that Tesla stock is “heavily tied” to bitcoin following its $1.5 billion acquisition of the cryptocurrency last month.

Though Tesla’s bitcoin acquisition is a “tiny portion” of the company’s overall cash position, Wall Street perception has begun to connect bitcoin and the electric vehicle maker “at the hip,” according to Ives.

According to Ives, Tesla likely made $1 billion in paper income on its bitcoin purchase in January, more than the profits it made on its underlying car business in 2020.

In the eyes of the street, there is a residual fear that the bitcoin sideshow will overshadow the overall EV growth storey playing out for Tesla in 2021 and beyond,” Ives explained.

The rapid drop in bitcoin in recent days is likely to have led to a drop in Tesla stock.

Bitcoin has dropped more than 20% from its recent peak of more than $58,000, and Tesla’s stock has dropped more than 20% after the company revealed it bought bitcoin on February 8.

However, bitcoin is a two-edged sword for Tesla, though it may benefit the company in the long run as more businesses adopt the cryptocurrency.

“We continue to believe that the bitcoin transition was a long-term strategic decision that will have repercussions as Square, Mastercard, MicroStrategy, and now Tesla accept bitcoin,” Ives said.

Provided that ARK’s ETF strategies have been buying the dip in Tesla shares, Cathie Wood of Ark Invest is likely to agree with Ives. According to Ark’s daily trading log, the company bought more than 200,000 shares of Tesla across all of its ETFs on Monday as the stock fell.

Wedbush retained its Neutral rating on Tesla and its $950 price target.


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