Bitcoin (BTC-USD) jumped on Coindesk reports The Securities and Exchange Commission has revived discussions with Grayscale about its spot bitcoin ETF. Tesla (TSLA) shares fell more than 6% after HSBC initiated coverage with a “Reduce” rating, citing Elon Musk as a “one-man risk” and long, robot-like betting timelines. Tapestry (TPR) reported mixed first-quarter results, saying there was a “difficult consumer demand environment” in North America.
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JOSH LIPTON: Okay, now let’s look at some trending tags. First, Bitcoin has renewed optimism about spot approvals of Bitcoin ETFs that will boost prices. And CoinDesk reported late Wednesday that the Securities and Exchange Commission had begun discussions with one applicant, Grayscale Investments.
So this rally continues here, Akiko. Of course, we are still far below that record high of $69,000, which was in November 2021. Then we had the crash in ’22, but now we are recovering.
Now we are at– we are reaching the highest price in the last 18 months. And Bitcoin fans, we know, would be excited. We talked to strategists and different investors. Crypto fans, at least, are very enthusiastic about the idea that maybe the SEC will step in and give the Bitcoin ETF the official green light. Their hope is that this will indeed encourage and motivate more adoption.
AKIKO FUJITA: Yes, it has long been seen as the next big catalyst for Bitcoin coming back from the big drops we saw last year. But still at $36,000, far from this $60,000, close to the highs of $70,000 we saw in 2021. We should point out that we are also seeing a big rally in Ethereum today.
Asset management giant BlackRock is potentially taking that first step toward a Delaware division of Ether ETF corporations. The website there shows that there is a registration for the iShares Ethereum Trust, so there is a lot of excitement there as well. So ETF, crypto is certainly seen as another big lever that could potentially be pulled.
JOSH LIPTON: Yeah, I mean, you mentioned BlackRock. It’s always interesting, Larry Fink at first a skeptic, now a believer. I don’t know I mean, Larry talked to the right people or did some research, but there’s a change.
But as for you, Bitcoin’s move today also lifted shares of digital asset companies. Check out Coinbase. Check out MicroStrategy. Both also good in green.
AKIKO FUJITA: Okay, let’s look at Tesla stock under pressure. HSBC initiates coverage on the stock with the equivalent of a sell rating, saying the company is overvalued for what it provides. Analysts had a price target of $146. That’s a drop of more than 30% from these levels.
Now you see the stock is down more than 6% at this point. Josh, HSBC is not necessarily saying in the long run that this is not a company you want to invest in. Just talking about what’s driving this stock, whether it’s autonomous driving, whether it’s the Dojo supercomputer, these are all long-term plays for the company and HSBC that say it’s going to take a little longer than expected.
It should be noted that they also highlighted Elon Musk’s prominence within the company, saying that, in their words, this represents a significant risk for one man.
JOSH LIPTON: Yeah, as for what you’re trying to say Akiko, they’re talking about the uncertainty around the weather and just the commercialization of Tesla’s various bets. I know robots, autonomous vehicles, energy storage. I think it’s on the money here: “We see significant potential in Tesla’s prospects and ideas,” they told clients, “but we think the timeline is likely to be longer than the market and valuation reflect.”
And those comments about Musk were interesting because they said, listen, I think they’re saying, listen, he’s dynamic, he’s charismatic. But they argue that he represents a key man or a one-man risk, which is interesting because Tesla has tried to bring in different executives to expand their profile. But ultimately, when people think of Tesla, they still think of Musk.
AKIKO FUJITA: One man’s risk.
JOSH LIPTON: That’s it.
AKIKO FUJITA: That word, how many companies can you say that only one person really, really represents that brand?
JOSH LIPTON: A lot of people are in stocks because they believe in Musk, right? I mean, they’re fans. We had it here on Yahoo Finance. That is part of the thesis.
Okay, moving on to your final stocks that you’re going to be looking at here. Tapestry, the parent company of Coach, reported weaker-than-expected revenue, but adjusted earnings beat the stock here after the earnings call. So Tapestry here, bus owner, also Kate Spade, adjusted EPS, gross margins. That was ahead of the consensus, Akiko.
Citi says in a note here that market expectations are quite low at press time. So, in their opinion, the hurdle they had to cross was not too high. And here they continue to say, they actually have something to buy. They have a target of 48. They say that the margin effect, they think, has somehow compensated for that somewhat weaker than expected revenue.
AKIKO FUJITA: Yes, the CEO is saying, specifically, in these results that as the company moves forward, we are in a position of strength with a meaningful path for sustainable growth. Global growth is also always interesting to watch with a brand like Tapestry just given where some of those brands are operating, especially in a market like China. In particular, the company is eyeing international revenue growth of 7%. A lot of that was driven by the gains they saw in Japan, 12% there and 9% in greater China.
JOSH LIPTON: Yes, and the company is in the middle of buying Capri Holdings, the parent company of Michael Kors. They said the deal was moving toward closing, and some analysts said it should also ease some uncertainties. Shares had a difficult 2023. We should note that they are still down by about 20%, 25%.
AKIKO FUJITA: Yes, these luxury brands are always a good indicator of where the consumer is at, so when will we continue to watch.