Tesla Inc. (TSLA) – Get report The shares traded lower again on Friday, extending a move that earned nearly $ 275 billion in value from the clean energy automaker, triggered by rising interest rates and the continued correction of bitcoin.
Tesla’s shares have fallen nearly 30% since they closed at a record high of $ 883.09 on January 26, just a day before the 10-year benchmark benchmark yields begin their 65 basis point increase amid forecasts accelerated inflation and better prospects for economic growth.
Technology stocks, especially those with earnings expected to come later, are remarkably sensitive to rising interest rates, as the investor’s arithmetic assigns a lower “today” value to dollars earned in the future.
Tesla, which has recorded only a profitable year since its inception in 2011, is expected to increase its earnings consistently over the next few years as deliveries accelerate and production increases at new facilities in Texas and Germany, making its value ‘ today ‘more dependent on interest rate movements than companies that are currently in the blue.
Tesla shares fell 11.33% on the late Friday morning trading session to change hands at $ 551.00 each, the lowest since December 2 and a move that would set its market value at just over US $ 560 billion. At its peak in early January, Tesla was dealing with a market capitalization of around $ 834 billion.
ARK Innovation ETF (ARKK) – Get report Meanwhile, the shares were negative for the year, partly as a result of Tesla’s weakness. Cathie Wood, one of last year’s prominent fund managers and head of the $ 60 billion fund stable, has long been a supporter of Tesla and Bitcoin, two of her fund’s main assets.
That linked to a second vulnerability in Tesla’s stock, which may be linked to its recent $ 1.5 billion purchase in bitcoin, should be kept as an asset called “intangible” on its corporate balance sheet.
This means that, like the value of “goodwill”, it cannot be increased, but it can be reduced when bitcoin prices fall, leaving Tesla’s share price at least partially linked to bitcoin fluctuations.
Bitcoin prices have fallen nearly 20% since reaching a historic high of $ 58,000 on February 21, partly as a result of rising bond yields that make dollar holdings more attractive
Short selling interest at Tesla also remains robust, at $ 32.16 billion – or 6.4% of the float in circulation. Tesla’s short positions have been up $ 1.18 billion since last week, according to data from S3 Partners.
Betting against Tesla this year, in fact, netted sellers about $ 4.28 billion in mark-to-market profits, including $ 1.94 billion from yesterday’s nearly 5% decline.
The fundamentals of the car market are also not working in Tesla’s favor: earlier this week, its China-based rival NIO NIO warned that electric car sales in the world’s largest market would slow down in the first three months of the year after one – expected loss in the fourth quarter.
Tesla sold 15,484 of its Chinese-made cars in January, the China Passenger Car Association (CPCA) said last month, down from 23,804 in December. Tesla’s sales in China were about a fifth of its grand total in 2020 – when it delivered a record 499,550 vehicles – up from just 12% in 2019.
The CPCA will publish its February sales figures on March 8.
One investor who is not concerned with the fundamentals’ rate pressures is billionaire Ron Baron, one of Tesla’s first bulls who runs Baron Capital Management.
Baron, who owns 1.1 million Tesla shares in his personal account, reduced Baron Capital’s exposure by about 1.7 million shares in the past six months to an average price of $ 666.70, but still expects that shares rise to up to $ 2,000 over the next ten years.
“When we started talking about Tesla in 2014, I said we would make at least 20 times our money and everyone was skeptical,” Baron told CNBC on Thursday. “It was unlikely, in most people’s opinion, that electric cars would dominate.”
“Now, even General Motors GM expects to have a fully electric fleet in 2035, so it is moving in that direction and Tesla is the leader,” he added.