Tesla and Bitcoin Have Soared Since Election Day. We Size Up the Valuations.
I’m not much of a runner, so completing the New York City Marathon in my 20s was a triumph. But my clearest memory of the day is being out-hustled at the finish line—never mind my time—by an 8-foot foam dinosaur on one side and a man with a homemade “80 years young” T-shirt on the other.
T-Rex and Four Score earned my respect that day. But in financial markets now, I’m seeing an oddball Olympics of recent price gains that threaten to undermine what would otherwise be a handful of inspiring performances.
Take Tesla and Bitcoin, up 35% and 39%, respectively, since the day before Election Day, versus a 5% gain for the S&P 500 index. There’s a tidy narrative to explain each.
President-elect Donald Trump is likely to scrap rebates and tax breaks for electric vehicles. Tesla, as the EV scale leader, might suffer less than its rivals—“a clear competitive advantage,” writes Wedbush Securities analyst Dan Ives. There’s more: “The golden goose for Tesla remains a fast-tracked autonomous strategy which we fully expect under Trump and we estimate is worth a $1 trillion of valuation alone to the Tesla story over the coming years.” Tesla’s recent market value is some $1.2 trillion.
For Bitcoin, Trump piqued appetites in September by using the currency to buy burgers for crypto bros at a Manhattan bar. “The market has demonstrated its belief that a Donald Trump presidency and likely Republican-controlled Congress provides significant support for regulatory clarity in the U.S. and, in turn, greater crypto activity and adoption,” wrote J.P. Morgan’s crypto team on Nov. 12.
I’m even seeing some Bitcoin benchmarking. One strategist writes that Bitcoin has outshone Ethereum to the point where the ratio of the two prices has hit “key levels of previous support.” I guess that makes Ethereum a value? If so, both must be bargains relative to Dogecoin, the parody crypto, which is up more than 300% this year.
Where does Peanut the Squirrel fit into this valuation analysis? The orphaned New York City critter was adopted by a man in 2017, then became Instagram famous, then was seized in a raid and euthanized by the state’s environmental department, then was turned by the political right into a symbol of government overreach. A Peanut cryptocoin, naturally, hit a market value of over $1 billion. I don’t like to get political, but if I thought squirrel videos could raise that kind of cash, I’d have become the John Jacob Astor of Central Park trapping.
Please don’t say that valuations have gone bananas. One of those duct-taped to a wall just sold at Sotheby’s for $6.2 million. Robert Teeter, chief investment strategist at Silvercrest Asset Management, suggests that Brillo might be instructive here. Andy Warhol, known for finding artistic inspiration in Campbell’s soup and Heinz ketchup, once sculpted boxes of the steel wool scrub pads. One purchased for $1,000 in 1969 ended up fetching more than $3 million at Christie’s in 2010. The gain works out to a compounded average of 21% a year, versus just under 10% for the S&P 500.
I’m not sure what that means for taped bananas, or even how to calculate compounded returns for an asset with a one-week shelf life. Teeter’s broader point, he writes, is that “timing today’s market top might be a slippery endeavor.”
One Tesla bear is pushing back on the political narrative, and calculating what the recent stock run-up says about future sales. If lost EV subsidies will be an advantage for Tesla, they will be a relative one, not an absolute one, at a time when the company is already discounting to spur demand, writes UBS analyst Joseph Spak. As for the new administration easing the ride for autonomous vehicles, “there really aren’t any onerous federal AV regulations to ‘relax,’” writes Spak. “Further, a change in regulation doesn’t immediately solve, nor change the timeline to solve, the technological challenge of unsupervised [full self driving].”
Pricing Tesla’s robo-taxi potential isn’t easy. Spak reckons it’s worth $100 billion, versus a recent $45 billion for Alphabet’s Waymo unit and a $157 billion market value for Uber Technologies. He calculates that today’s car business accounts for only 12% of the company’s value, and points to an analysis showing that when that figure has dropped below 17% in the past, the stock price has tended to fall.
If Tesla were to simply boost vehicle sales to grow into its valuation, Spak reckons that it would have to ship some 15.5 million units a year by 2030, versus a consensus estimate of 4.8 million. His price target for the stock is more than $100 below its recent price.
Who knows? Maybe robo-taxis will take off soon, or Tesla’s other ventures—like home solar and battery storage or Optimus humanoid robots—will surprise to the upside, or Elon Musk’s early and eager boarding of the Trump Train will be good for business in ways that aren’t clear yet.
Bitcoin, which was recently hanging around the $100,000 mark, is trickier to size up. I could point to the collective $3.5 trillion market value of crypto, and compare that with something that generates profit, like Apple, or all of the companies in the small-cap Russell 2000 index. But that doesn’t tell us where Bitcoin is headed next. I could cite price targets. Cathie Wood says $3.8 million by 2030. Warren Buffett says zero, ultimately. Put me down for something in between.
My only Bitcoin conviction is what I’ll call the Peter Pan principle. For the thing to keep rising like it is, I’m pretty sure it must never grow up. Mainstream financial utilities are predictable and boring. But rogue money has open-ended potential. “All the world is made of faith, and trust, and pixie dust,” as the Lost Boys leader said. Here’s wishing Bitcoin holders more promise of government support—but not too much delivery of it.