In February, Nicholas Colas, co-founder of DataTrek Research, discussed Tesla Inc (NASDAQ: TSLA ) CEO Elon Musk’s decision to invest $ 1.5 billion of the company’s cash in Bitcoin (CRYPTO: BTC ).
This week, Colas has analyzed the current situation of Tesla and has claimed that the shares could remain “stagnant” until one of the two possible catalysts happens.
Pair trade: Last February, Colas stated that Musk’s investment in Bitcoin was a sign that investors should consider buying Bitcoin long and Tesla short, as that was basically what Musk was doing by buy Bitcoin instead of investing that cash in Tesla’s business.
The Colas pair trade strategy has worked wonders so far. Since Tesla first announced its investment in Bitcoin on February 8, the company’s shares are down 20.8% and Bitcoin prices are up 17.6%.
On Wednesday, Colas noted that Musk is now at a critical point as a disruptor, where he must choose between following a path similar to that of Henry Ford, founder of Ford Motor Company (NYSE: NYSE: F ), or that of Jeff Bezos. , founder of Amazon.com, Inc. (NASDAQ: NASDAQ: AMZN ).
Ford’s long-term path to disruption and growth was focused almost exclusively on producing large volumes of affordable cars and reinvesting the profits in its business, Colas explained.
For his part, Bezos grew Amazon to its current valuation of $ 1.7 trillion by opting to diversify Amazon from e-commerce to cloud services.
Two Paths to Choose: Tesla’s auto business is still in the early stages of its growth story, so Colas believes Musk must choose between concentrating all of the company’s resources on increasing production and selling autonomous vehicle services. , or present a new idea that expands the current bullish thesis of the company.
“Tesla as a stock remains stuck here (or below this level) until 1) a Model 3 is able to drive autonomously and safely in a dense urban area, as would be applicable to carpooling, or 2) Musk introduces his version of Amazon Web Services, a great scalable idea that takes advantage of some core competency or business attribute, ”stated Colas.
He claimed that investing Tesla’s cash in Bitcoin and then promoting it to other companies as a way to diversify balance sheet liquidity might be an idea that will fuel the company’s growth, but that it is too early to say right now that that’s the direction Musk wants to go.
Benzinga’s take: Obviously, the market doesn’t think Bitcoin is going to be a game changer for Tesla, given how underperforming stocks have been in recent months. Unfortunately, the company could be light years away from the kind of large-scale robo-taxi service that would justify a valuation significantly higher than the stock’s current $ 655 billion market capitalization.