TSLA Stock: How High Could It Go?
Tesla’s stock price flew right past our 2020 target.
Things at Tesla move at a different speed than other businesses (and we’re not just talking about its cars).
It pushes, produces, improves and innovates. The company doesn’t let anything slow them down.
And Paul and I think the stock is on FIRE!
Watch today to see our thoughts on TSLA post-earnings and our next price target. Plus, updates on market moves, pot, bitcoin and possibly a new Blacklist company you should avoid if it falls into America 1.0 territory.
Check it all out here:
Welcome to another edition of the Iancast.
Tesla Stock Continues to Soar
The company is on fire and they are only getting better.
I think it’s very possible that the company will hit $4,000, because their business is so small compared to what it’s going to be in the near future. Not just their car business but also their solar business. They have barely even kicked off their self-driving business. It’s only been integrated into a couple of their cars at this point.
One of the big things coming out of the earnings report that few have been talking about is that they expect these three gigafactories that are under construction to be finished within 12 to 18 months.
Elon is always full speed ahead on everything. Which is why things at Tesla move at a completely different speed than any other company. And they move on all fronts simultaneously. They are moving on the production front in terms of everything they are already producing — Model S, Model X, Model Y.
Their development is in the Tesla Semi and the Cybertruck, which the gigafactories are going to have to support. Then there’s Autopilot there. Something that very few people think about is all the development they are doing in terms of batteries. Unthought of by many people is the small but constant improvements Tesla is making in the range of the cars.
Tesla is building more charging stations as well as building on all fronts of their business. Their energy storage business is another thing from the earnings report that hasn’t gotten much news. Their energy storage business and the deployments of the batteries grew 61% from the first quarter.
That part of their business is on fire. Elon said solar roofs are going to be installing 1,000 per week by the end of the year. That’s another several billion dollars on an annual basis they are going to be adding not too far from now.
Tesla is a very unusual company and you are really buying into today’s equivalent of the utility company in terms of being able to distribute energy, like ExxonMobil, or the refinery energy space through the battery and then there’s the element of mobility. On top of that, there’s also the element of artificial intelligence (AI) and neural networks and Autopilot.
Many people continue to compare Tesla to General Motors and Ford — which we believe is a terrible comparison. Ford and GM do not compete with Tesla. There really isn’t a direct competitor to Tesla.
Even with Autopilot, Google’s is all simulated miles. All the others largely have simulated miles because they don’t have cars on the road. On a previous Iancast, we talked about how Tesla’s approach is different from Google, who is going for intensely fine mapping, which means you must have everything mapped to the last centimeter.
Versus Tesla using neural networks, AI, pattern recognition and pattern intelligence to see how people go through a certain driving situation relative to the conditions. If you can use that in one country, you can see it scales across many countries. It’s more difficult up front but to globally roll it out is much easier in the long run.
The fact that Tesla is already incorporating self-driving features in current cars is like getting your customers to basically improve your business. Whenever someone uses the feature it gets downloaded to the machine learning system that powers that whole feature for Tesla.
It’s the essence of AI. If you have enough data from there, you have the ability to make the best decisions. In terms of the stock, Tesla has been in our portfolio for a year and a half or maybe two years. I think the recorded price in portfolio is something in the $350 range.
People continue to focus almost exclusively on Tesla. This is a market that’s full of opportunities. There is no need to just focus exclusively on Tesla. It’s a great company, it does a lot of things.
Its stock market capitalization is $300 billion and we believe it can go up much more, but there are other companies that are smaller that can go up even higher.
It’s all a matter of scale. Not long ago, Tesla was $60 billion or even less than that. The companies that are smaller and have similar growth prospects are more likely to go up more at this point. There might be some more profit taking at Tesla because it’s up 600% or 700% in a year.
Long term, they look unstoppable in several big multi-trillion-dollar market fronts. The market for this company is ridiculously big. I think they are just getting started. They only have a couple cars being mass produced and they are barely off the ground with their solar roof. It’s only going to be higher growth ahead.
Tech Giants Driving Market
Looking at what happened yesterday, the Nasdaq opened big and then had a big trail off. Taking a look at what was driving that, Apple and Apple’s stock were down quite significantly.
Microsoft reported earnings and they are seeing profit taking. That’s another trillion-dollar company. Big companies like Apple and Microsoft can have a big effect on the overall market. What you see is that the S&P 500 has barely gone up since early June. It was at this level on June 4.
Meanwhile, a lot of stocks in the America 2.0 sectors are up 20% or even more from that point. Those stocks going up don’t have that much of an effect on the S&P 500 or the Nasdaq because they are so small, but that’s where the real opportunities are.
You can also see that there is this continuing back-and-forth transition between America 1.0 and America 1.5 — if you want to put it that way. I consider Microsoft to be America 1.5. Not quite 1.0, not quite 2.0. They do have a cloud business I like, but then there’s the Windows business I think is going to go away.
It’s going to be superseded by any number of things. I think Chromebooks. If I go look at what any number of kids are using today, the vast majority of people are using Chromebooks. Some form of Linux or Android is going to take over. It’s low cost and widely implemented.
Innovation always follows through the vector of convenience, low cost and more access because they interact with each other.
Microsoft and Apple are kind of like that middle ground. Apple is more 1.0 because of what we have been talking about for several years. They have spent nearly $300 billion in share buybacks.
They have taken their jackpot earnings from the iPhone and chosen to focus its corporate intent on buying back stock. People say they generate all this cash and what do we expect them to do. Technology innovation is cyclical.
Once you have three big hits like they did with the iPod, the iPhone and the iPad, it destroys the incentive to innovate within the company. Then that drives a downcycle that’s expensive to resuscitate. It takes time, energy and a lot of money. They have spent $300 billion which they could have spent on — who knows what.
Softbank was trying to sell them a piece of Arm, which is a custom chipmaker. You would think given what the world is going to be in terms of the amount of computing power to develop AI, blockchain, really everything. Even the continuation of Internet of Things (IoT) or to facilitate additional computing power for robotics.
$300 billion, you could get a lot of value for that. Instead, their focus has been on their stock. In many ways people think of Warren Buffett as being a hero investor. However, for Apple to have a stock focus I think is pretty bad.
Until Apple and Microsoft become slightly bigger weights, America 2.0 stocks are where you want to be. The S&P 500 is not even positive for this year.
The thing with Arm was because it wasn’t even the whole business, it was just a part of it. You would think a company like Apple, which doesn’t really seem to have that much up their sleeve for the future, would want to get in on that. They turned it down and Nvidia immediately took advantage.
There’s demand for these companies yet for some reason Apple is ignoring it. They are focusing on the short term by just buying back shares and propping up the share price.
They are too busy there in Cupertino watching the stock price rather than focusing on innovation. Apple is still the number one stock in the S&P 500, still the largest contributor to the Dow and still the largest contributor to both the Nasdaq 100 and the Nasdaq Composite.
Any time Apple goes down, it is going to take those indices down. On those days, our stocks will also decline. However, on the up days our stocks will jump higher. AMD is a great example. It’s something we have held in the portfolio for a long time.
It’s also a multi-hundred-percent winner for us over time. It’s a stock that is eating Intel’s lunch. Intel is another stock on our Blacklist. Just to define this for folks, that’s a list of stocks that we put together in a special report you get with our America 2.0 pick as well.
AMD is a great example. I don’t know if Apple uses AMD chips. AMD Ryzen chips I believe are the fastest on the market. They blow a bunch of other companies away.
We are positive even on the S&P 500. However, the rate at which you are going to get gains, because there is cyclical recovery underway, it’s going to benefit a lot of companies in the S&P 500, the Nasdaq and even the Dow.
Even the laggard companies, like travel stocks, and banks are starting to go up right now.
But we can also see that if you look out past five or seven years many of these sectors and indices have no future at all. We are still positive. There will be a general upward move. However, America 2.0 stocks are where we are exclusively focused.
Gray Scale Announcement Moves Crypto Sector
There are multi-hundred-percent winners. Now it looks like the big boys — Bitcoin, Ethereum, Ripple, Bitcoin Cash, Litecoin — are all starting to move. It’s concurrent with an announcement from Grayscale.
Ethereum was up double digits yesterday. I am not sure if it made a new 52-week high, but if it didn’t, it was close. It’s gone up to around $300 a couple times over the past year. Then it’s gone down again. I think this rally is for real because of the supply and demand balance of Bitcoin.
With Grayscale buying a bunch of the Bitcoin up, literally every Bitcoin that was mined plus more after the Halving, shows that the demand is real. That’s what’s going to drive the value. If sentiment around Bitcoin is good, sentiment around crypto in general is going to be good.
Bitcoin is the proxy for blockchain based investments. Ethereum is more like difi, digital banking and digital insurance where you have smart contracts involved. Then you have all the Ethereum on blockchain. Ethereum itself is around $30 billion in market cap right now.
To me that’s really low. There are hundreds, if not thousands, of projects going on on the Ethereum network. You have all these amazing new technologies coming out. If you are a startup in crypto, the Ethereum platform is where you are going to develop your project.
It’s like by buying Ethereum you are spreading your money out into a bunch of projects in a way. The price of Ethereum might be one of the smaller ones, but that’s not necessarily a bad thing. It’s like buying an ETF in a way. You are getting the benefit of a lot of different companies.
When we looked at the ETHE tracker I believe we found there were in excess of 1,500 projects on the Ethereum blockchain at that time. I’m certain it’s bigger. There are other ones out there. Ripple is out there, Lumen.
If you are going to put the world’s information, all our identity data, on blockchain, we are going to need a few blockchains. I don’t think one will do.
Transaction prices in the Ethereum network are up 10X since the beginning of the year. It’s getting crowded. They are going to have to scale. That’s going to be a big thing for them going forward.
It shows that a lot of people are putting money and time and resources into crypto and blockchain. These technologies are not going to go anywhere anytime soon.
Not only that, there’s a few fintechs, including Lemonade, that went public recently. Then there’s PayPal and Square out there. However, a significant amount of all that is going to go into crypto.
It’s going to zero out the old guys. We put out targets for Bitcoin of $50,000 this year. $100,000 in the nearer term. We believe the next peak will be in the Tim Draper range around $250,000 in a three to five-year timeframe. We are still BOP on crypto in general. We can see the future coming at this really fast.
People are talking about Wells Fargo and stuff like this. Forget this. Insurance companies have been devastated by the current crisis. In the future, there are so many parts of our current economy that are going to be completely revolutionized by crypto. Housing, in particular, is on fire in the U.S.
Imagine if we had smart mortgages and fractional ownership on the blockchain how much faster this stuff would go.
It would be instant in terms of buying a house. Things like buying a car or things that involved paperwork that people hate to do. It takes a lot of time and effort. Smart contracts are going to make all that a lot simpler. There’s no middleman. There’s nobody trying to price gauge you in the process.
There won’t be any of these fees. It’s better all around. It’s only a matter of time before these become the norm.
Demand for Cannabis Continues to Rise
A recent article from CoinDesk had interesting stuff for crypto, fintech and cannabis. Crypto was the OCC, which is a regulator of banks and they set parameters for what banks can do.
The headlines were that banks could now get custody of crypto assets, they can deal in crypto, they can take in crypto assets. Most banks aren’t going to do anything about it. More importantly, it also allowed companies in fintech to operate over multiple states without having to get state-by-state approval, which is great for PayPal and others.
It also allowed for crypto payments to be accepted all over the country, which is also positive. A lot of people will say Bitcoin isn’t going to be accepted. We think Bitcoin will largely be a storage of value. These payments are going to happen through apps and defi and all these other things in fintech.
This rule that has been put into place really allows for pretty rapid adoption if you want to implement the solution. The other thing the article talks about that’s in this regulation is that it allows for banks to deal with any company that is legally incorporated.
Now it also means that cannabis companies that have been locked out from official banking can now go and open accounts and banks no longer take on legal liability. It’s essentially, in a way, legal approval for banks to deal with cannabis companies. They are making it easier from the perspective of the law and banking for cannabis.
This opens the cannabis business. One of the big hindrances for cannabis is that they don’t have banking facilities.
It comes at a perfect time for marijuana stocks and companies. Right now, some of these are in big rally mode. Planet 13 just made an all-time high. True Leaf juts made a 52-week high last week. Curaleaf is right up there. These U.S.-based marijuana companies are on fire and I don’t think it will be long before Canadian ones follow suit.
That’s just based on that rally we saw last May where Aurora Cannabis went up 250% in three days and The Green Organic Dutchman went up over 150% in those same three days. I don’t think that was a fluke. I’ve said this before but the selling in these companies is done.
The buying at this point is only going to get bigger. They are trading at super low values to what they are currently making in sales and what they are expected to grow in sales. They are getting to expand into the United States and other markets that are bigger. The future is bright for these Canadian stocks.
It’s going to drive up the MJ ETF. I said it would be up 100% at the beginning of the year and I wouldn’t rule that out yet. It’s a long way from here but things can change really fast.
They have been bid down to such crazy prices relative to the future unfolding. The demand for cannabis continues to rise. Its use continues to rise. Just the pure transition from illegal to legal represents a massive opportunity. Beyond the move from people preferring cannabis over the old things like wine, beer, spirits, tobacco, that shift is still in place.
There were also other companies starting to make new 52-week highs. It’s often a good sign when you see a set of companies start to make new highs. In the market, that’s a sign the whole sector is starting to get bid up. We’re still BOP on all the things we covered here — America 2.0 stocks, Bitcoin, Tesla and cannabis.
Editor, Rebound Profit Trader