It may seem like an incredible stroke of genius, but don’t be lulled into a false sense of security by Tesla’s Bitcoin play.
Between Capitol riots, plane parts falling from the sky, and ‘Kimye’s’ divorce, 2021 has been a tough one already. However, for Tesla (NASDAQ: TSLA) and Bitcoin bulls it may be one of the greatest financial years they’ve ever had (so far).
However, should Tesla bulls be worried about their investment?
Going back to basics!
According to analysts, Tesla has already returned roughly $1 billion on the $1.5 billion Bitcoin investment that it made just a few weeks ago. Even with CEO Elon Musk engaging in his favorite past-time of tweeting market-moving sentiments — he thinks Bitcoin is “too high” now by the way — its price remains well above $40,000.
While the Bitcoin investment is currently a sideshow for Tesla, it has more than doubled the $721 million in profit the company made from selling cars and regulatory credits in 2020.
However, investors need to be wary that Bitcoin is an extremely volatile asset. For example, its 2017 highs were $20,000 before falling below $4,000 in early 2020 and then rising to more than $50,000 last week. While the current popularity appears less likely to be a ‘fad’, Tesla cannot rely on this as a source of consistent income right now.
If you are buying Tesla stock based solely on an interest in Bitcoin, it might be worth looking into the fundamentals of Tesla as a business. After all, this is a car and data company that only just reported its first profitable 12 months. Try not to lose sight of the fundamentals when buying Tesla, or any other stock that is dabbling in Bitcoin.
Read our thoughts on Tesla as an investment here.
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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.