As U.S. stocks continue to stake out new highs ahead of the holidays, some say it’s beginning to look a lot like a meltup out there. With a patient Fed and TINA (aka there is no alternative), what could go wrong?
A selloff for one big popular stock cascading into an avalanche for the broader market? Maybe. Over the weekend, Tesla
TSLA,
CEO Elon Musk worked Twitter into a frenzy, asking followers to vote on whether he should sell a 10% stake. After a vote to sell, shares are down around 5% in premarket.
Here’s Steen Jakobsen, chief investment officer at Saxo Bank, with a glass-half-full view: “The tactic of pre-emptively asking the public is smart as a traditional move with a block trade announced with the stock exchange could have been a negative story for Tesla. This move can remove that negative surprise and allow Elon Musk to liquidate some of his holdings at Tesla.”
Here’s another big investor saying, chill.
Musk’s latest Twitter adventure coincided with fresh bullish views from Wall Street. First up were Wedbush analysts, lifting their bull target to $1,800 a share from $1,500, citing the underlying EV growth story and a big China market.
Meanwhile, Jefferies analyst Philippe Houchois on Monday lifted his Tesla price target to $1,400 a share — the highest on Wall Street — from $950 in a note to clients. Here’s the crux of Houchois’ view and our call of the day where he lays out how legacy auto makers are struggling to catch up to Tesla:
“Like in 2020, Tesla’s price is sending a warning of relevance to traditional and also challenger OEMs [original equipment manufacturer]. With an acceleration of self-funded growth in Q3 and un-heard-of returns at a brand price point moving towards volume segments, Tesla looks more scaled up today than most OEMs and in position to turn the Legacy zero-sum-game into a negative one,” said Houchois.
The analyst pointed out Tesla’s last two sets of “impressive results,” and “multiple competitive edges” that are likely to last longer than many investors think. Such as “direct selling to battery density/cost, software, chip design/sourcing and design-to manufacture, altogether avoiding the complexity and inefficiency that are plaguing the industry’s business model.” And the response from OEMs is slow, with only one or two challenges tackled at a time, said Houchois.
Tesla is also reaching a point where it can “balance affordability and speed, goals which are as important as profitability in Elon Musk’s vision,” said the analyst.
As model range and price points drift toward midmarket and away from BMW and Mercedes-esque prices and with a still-to-be-confirmed Model 2 on the way, Tesla could grab share from bigger OEMs, “potentially claiming a disproportionate share of the industry profit pool in the coming 3-to-5 years as legacies enter the margin dilutive EV transition phase.”
The buzz
Shares of Live Nation Entertainment
LYV,
are dropping after a deadly Houston music festival over the weekend, where a crowd surge killed eight people died and left scores injured.
U.S.-listed Chinese education companies Gaotu Techedu
GOTU,
and New Oriental Education & Technology
EDU,
are surging on a report in The Wall Street Journal that China plans to issue licenses to companies to offer after-school tutoring.
The first set of earnings since its initial public offering are ahead from restaurant group First Watch
FWRG,
with online videogame group Roblox
RBLX,
and payments giant PayPal
PYPL,
due after the close.
Jefferies analysts downgraded German auto maker Volkswagen
VOW3,
VOW,
to underperform from buy, saying CEO Herbert Diess’ constant Tesla references have “become counterproductive, highlighting vulnerabilities rather than imaginative solutions.”
Elon Musk’s brother Kimbal sold 88,500 Tesla shares on Friday, according to a Securities and Exchange Commission filing.
The House passed a $1 trillion public-works bill late Friday, but President Joe Biden may be facing hurdles on ambitions over a bigger spending bill.
China exports surged 27% from a year ago. The big U.S. data this week will come Wednesday, with October consumer prices.
Trans-Atlantic routes between the U.S. and 30 countries officially reopen on Monday. And as COVID vaccines for younger kids roll out in the U.S., one of the world’s oldest six-year-olds tweeted his encouragement:
The markets
Uncredited
Stock futures
ES00,
YM00,
are mixed, with Nasdaq-100 futures
NQ00,
slightly down. Oil prices
CL00,
NQ00,
are climbing after Saudi Arabia’s Aramco announced big December price hikes for Asia and Europe. Natural-gas prices hikes seem to be getting no relief in Europe.
There were big moves elsewhere in crypto, as Ethereum
ETHUSD,
topped $4,700 for the first time.
Random reads
How a gambler with duffel bags of cash got a Los Angeles casino into big trouble.
A distressed teen was rescued after a passing motorist spotted her hand signal that has gained popularity on TikTok.
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This post was originally published on Market Watch
