Tesla (NASDAQ:TSLA) and Bitcoin (BTC) used to have a symbiotic relationship. Historically, both have been seen as indicative of the appetite for risk amongst investors.
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But since last September, they seem to be on different paths, and the previously strong correlation between Tesla’s share price and Bitcoin’s has weakened. Since 2020, there was usually a correlation greater than 0.5 between the two, but since September, it has become a negative correlation of -0.59. The different directions are easy to tell when considering the price action. Since the turn of the year, TSLA shares have declined by 28%, yet BTC is currently notching all-time highs, having gained 63% in 2024.
So, what’s behind the diverging paths? Morgan Stanley’s Adam Jonas has an idea.
“We believe the correlation began to break-down around the time of [Tesla’s] disappointing 3Q23 results, impacted further by the disappointing FY24 outlook for ‘notably lower’ sales growth,” he explained. “Our most recent estimate revision takes our forecasts very close to break-even/implied loss-making within the core auto business.”
In general, investors have been pivoting away from EV names, once hot property, and since Tesla is the segment leader, Jonas believes that the shares have struggled to detach from the pessimistic sentiment surrounding EV fundamentals and positioning. Additionally, at the same time as Tesla’s business was beginning to show signs of deterioration, investors started leaning heavily into the AI theme, with Jonas believing the shares are being “used to ‘fund’ more active momentum AI plays.”
So, how does Jonas see the way forward for TSLA shares from here? “We expect to see earnings revisions trough in mid year before investors contemplate the potential of a new model cycle and Tesla’s optionality to the broader AI theme,” the Morgan Stanley analyst wrapped up.
Despite the downbeat sentiment, Jonas remains the Street’s biggest TSLA bull, maintaining an Overweight (i.e., Buy) rating on the shares while his Street-high $320 price target implies the stock will deliver returns of 79% a year from now. (To watch Jonas’s track record, click here)
Unlike Jonas, the majority of Street analysts are more pensive; the stock claims a Hold consensus rating, based on 19 Holds, 10 Buys and 6 Sells. However, the $209.72 average target still makes room for one-year gains of ~23%. (See Tesla stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
