Since the outset of the COVID-19 pandemic in early 2020, the stock market has embarked on a journey with ups and downs, the likes of which had been unprecedented. As the saga goes, the virus set in, and people were at home and looking for entertainment. This, coupled with the hopeful possibility of building wealth directly from one’s phone and/or couch, brought a new generation of retail traders to the market. They began to push speculative equities and securities around in their search for quick value.
The trading platform Robinhood has been central to this stock market tale, allowing commission-free trading with a streamlined, easy-to-use mobile application to “democratize finance for all,” as is its motto. Its popularity culminated in a one-in-a-lifetime short squeeze in late January 2021, wherein highly motivated Reddit users attempted, and succeeded, to push up the price of GameStop Corp. (GME) stock in order to force hedge funds to cover their massively shorted shares.
This particular instance brought about massive negative sentiment for the growing financial application company, as Robinhood was forced to halt buy orders for several high volatility stocks in order to not go bankrupt themselves. The phenomenon brought Robinhood into global headlines and even had U.S. government officials using terms like “meme stocks.”
Critics of Robinhood’s platform accuse it of gamifying the stock market with a sensationalizing user interface, and essentially creating an accessible and legal casino for anyone willing to play. The app allows users to quickly trade even the most leveraged and risky positions, including complex derivatives such as options and other financial tools. While other similar mobile platforms also allow this, Robinhood users go through much less data and cautionary information before having their trades executed.
Despite the bad press, including congressional hearings with Robinhood’s CEO, the platform has since continued to grow its user base.
Keeping an eye on retail traders’ interest in stocks has become a full-time job, and can mean the difference between massive gains or just another week of FOMO. Many websites provide trending stock tickers or even analytics on subreddit mentions of publicly traded companies. As Robinhood is mostly used by younger retail traders, looking at its top-traded stocks can provide insight into what direction certain stocks may be going.
Two stocks frequently found at the top of Robinhood traders' accounts are Tesla Inc. and Apple Inc. Both tech-savvy companies have seen their share prices rise dramatically over the course of 2020. Furthermore, both underwent stock splits, which made their stocks accessible to more people, resulting in a lot of online buzz.
Tesla Inc. (TSLA)
Five-star analyst Jed Dorsheimer of Canaccord Genuity Capital Markets reiterated a Buy rating on Tesla, with an optimistic price target of $812. This suggests a possible upside of 30.27% from Friday’s closing price of $623.31. (See Tesla stock charts on TipRanks)
Dorsheimer wrote that Tesla is “innovating past the battery” while other manufacturers are playing catch up. He was bullish on a long term basis, arguing that the car company is “creating an energy brand and an Apple-esque ecosystem of products with customer focused connectivity, seamlessly marrying car, solar, and back-up power.”
The analyst did, however, call the new Model S Plaid an “ostensibly unnecessary $130k car,” but that does not mean consumers won’t like the finished product enough to not buy it.
On TipRanks, TSLA has an analyst rating consensus of Hold, based on 9 Buy, 7 Hold, and 7 Sell ratings. The average analyst Tesla price target is $620.70, reflecting a potential downside of 0.42% over the next twelve months.
Apple Inc. (AAPL)
Another consistently top stock pick from Robinhood traders, Apple Inc. has seen its share price climb more than five-fold over the last five years. The most valuable company in the world, with a market cap of over $2 trillion, the company has always had a loyal customer base, which seems to translate into loyal shareholders as well. (See Apple stock charts on TipRanks)
Daniel Ives of Wedbush Securities was bullish following Apple’s new updates, which were announced during its WWDC conference. Ives maintained a Buy rating and a $185 price target, indicating a possible 41.81% upside from Apple’s Friday closing price of $130.46.
The five-star analyst wrote that Apple had placed a strong focus on user privacy concerns, which puts the company “on a collision course with Facebook around the ability for users to block data tracking.” However, Ives was encouraged by the improvements made by the new macOS Monterey desktop operating system, stating that it will support the “broadest lineup of Macs in history.”
On TipRanks, AAPL has an analyst rating consensus of Moderate Buy, based on 20 Buy, 5 Hold, and 2 Sell ratings. The average analyst Apple price target is $157.88, reflecting a potential 12-month upside of 21.02%.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
Recent surveys of hedge fund CFOs, wealth managers, and institutional investors highlight that interest in cryptocurrency is far from waning. Corporations and investment professionals are merely in the very early stages of amassing exposure to this nascent asset class.
Is cryptocurrency adoption reaching a tipping point? Surveys conducted by Nickel Digital Asset Management and Intertrust Group in many ways reflect this notion. The survey results highlight the growing interest in allocating portions of cash holdings and treasury reserves to Bitcoin. (See Bitcoin Stock Comparison on TipRanks)
Although MicroStrategy (MSTR) and Tesla (TSLA) may have dominated the headlines with their purchases of the seminal cryptocurrency, they are but a few of the publicly traded companies that have exposure to Bitcoin, according to Nickel.
The firm’s research pointed to 19 listed companies, with a collective market capitalization exceeding $1 trillion, that currently have Bitcoin allocations worth approximately $6.5 billion on their balance sheets.
The geographical composition of these companies is mainly centered on North America, with 13 Canadian and U.S. companies making the list. The remaining companies are located in Europe, Turkey, Hong Kong, and Australia. Moreover, Nickel revealed that another 17 unnamed companies had added exposure to the asset class, although details are sparse at this stage.
More impressive than the publicly-listed companies accumulating the cryptocurrency is the $43.2 billion of Bitcoin held by exchange-traded products (ETPs) and closed-end trusts. Besides retail exposure, the exciting development here centers on the growing adoption by asset managers and institutional investors.
Cryptocurrency Numbers Rising
Besides for the allocation research, Nickel’s survey of 50 wealth managers and 50 institutional investors earlier this year revealed the following staggering highlights:
● 81% of respondents expect to see a greater number of corporations embrace Bitcoin as part of their treasury reserves
● Of the 81% of respondents, 29% believe that this trend will experience sensational levels of growth
These results are echoed by an April survey of 100 senior-level hedge fund participants from Europe, North America, and Asia, which was commissioned by Intertrust Group. Among the revelations was that 98% of respondents believe that their funds will have investment exposure to cryptocurrencies within the next five years. In addition, allocation forecasts revealed the following:
● Survey participants believed that, on average, 7.2% of cash holdings would eventually be stored in cryptocurrencies
● Of the total, one in six of the respondents thought that more than 10% of their total investment holdings would be in cryptocurrency
● The highest levels of exposure are expected in North America, where respondents expect to see allocations on average reaching 10.6% of AUM
Adoption in its Early Stages
Together, these noteworthy findings suggest that the pace of adoption, both in the corporate and financial industry spheres, is only in its early stages. For instance, figures compiled by The Carfang Group, which are based on Federal Reserve data, show that US corporations had cash holdings of approximately $3.82 trillion on their balance sheets at the end of 2020. Even if only 1% of this total, $38.2 billion, were allocated to cryptocurrency, it would mark a nearly 6-fold increase compared to today’s $6.5 billion in corporate Bitcoin holdings.
Even if corporate, hedge fund, and institutional investor accumulations stay in the single-digit percentage levels for the years to come, inflows could significantly outstrip the $38.2 billion previously mentioned.
Figures corresponding to the higher range of the estimates posited by the survey respondents reveal that Bitcoin adoption momentum could be faster and more furious than even the most conservative estimates model.
Disclosure: Reuben Jackson held no position in any of the stocks mentioned in this article at the time of publication.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
NIO Inc. (NIO) designs and manufactures high-tech electric vehicles in China. As a major player and innovator in connectivity, autonomous driving, and artificial intelligence technologies, it competes directly with Tesla (TSLA).
The main value for NIO comes from its competitive positioning in the luxury electric vehicle market (especially SUVs) in China, stemming from its comparable technology combined with its cheaper price point.
Furthermore, as a leading local manufacturer and innovator in high-priority cutting edge technology fields, the Chinese government has a vested interest in NIO’s continued growth and success. This should not only lead to continued financial support through difficult times, but may also lead to the government-controlled media stirring up popular opinion against its main competitors, as it has done with TSLA recently. (See Nio stock chart on TipRanks)
The company is expected to continue generating strong growth on the back of the re-opening of the global economy following the COVID-19 outbreak, as well as the continued robust growth of the Chinese middle class. Moreover, as its advanced automotive technologies continue to emerge and take a greater share of the overall global automobile market, demand for its products and technologies should grow.
That said, the company also has numerous challenges with which to contend. First and foremost, it already faces significant competition from larger companies, such as TSLA, that possess powerful innovative capabilities and strong brand images. Additionally, as a Chinese company, it faces significant political risk (as Alibaba (BABA) recently learned the hard way), accounting risk, and execution risk. The latter risk is due to the fact that it is still a smaller scale business that has to deliver on aggressive growth expectations.
Valuation Metrics
Despite these challenges, NIO still possesses a strong position in the space, giving it a significant edge to leverage in terms of industry-specific consumer data and network. However, its valuation remains elevated. The forward price to cash flow is a whopping 95.6x, and the company is not profitable yet on a GAAP basis, while simultaneously bleeding cash.
The good news is that revenue is expected to triple over the next two years and the business should finally be profitable on an EBITDA basis in 2022, though the EBITDA margin will still likely be razor thin at just 2.3%.
Between its backing from the Chinese government and its $47.2B cash and short-term investments stockpile, it should have the financial backing it needs to fund its ambitious ventures and reach profitability within a few years. However, it remains highly speculative given that it must deliver on massive growth expectations in a short period of time, against significant challenges.
Wall Street’s Take
From Wall Street analysts, NIO earns a Strong Buy analyst consensus based on 8 Buy ratings in the past 3 months. Additionally, the average analyst Nio price target of $61.91 puts the upside potential at 31.98%.
Summary and Conclusions
NIO is a highly speculative investment right now, as it has a very elevated valuation. Therefore, it must deliver on sky-high expectations in the face of numerous risks in order to deliver long-term investors a respectable return.
That said, it still has a lot going for it. Nio is strengthened by its status as a domestic leader in high-priority cutting edge technologies and a high visibility global industry. The Chinese government is likely to continue assisting the company directly and indirectly moving forward, and the strong tailwind from China’s growing middle class should also boost Nio significantly.
Overall, the business is likely to continue growing and analysts remain bullish on the shares here. That said, given its lofty valuation and steep climb to achieve profitability in the face of top-tier competition from the likes of TSLA, the stock remains a risky bet. Investors might be prudent to take that into account before establishing a position.
Disclosure: On the date of publication, Samuel Smith had no position in any of the companies discussed in this article.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.