If you listen to the market (right now), this “Magnificent 7” member is a $200 stock. More like $160 to be exact.
But if you listen to Cathie Wood of ARK Invest, expect Tesla to be a $2,000 stock within three years.
That would make it one heck of a buying opportunity right now. And, indeed, her firm and its flagship fund, ARK Innovation ETF (ARKK), have been adding TSLA shares.
But this magnificent stock has been anything but lately.
TSLA has fallen sharply in recent months – down 35% just since the start of the year, and more than 45% from its 52-week high last July.
If Cathie Wood is right, that monster run to $2,000 would generate more than 1,100% profits.
I’ve had some 10-baggers in my time, and they really get the adrenaline flowing. And they’re great for your bank account.
They are also not easy to come by, so let’s talk about Tesla’s chances of being a 10Xer.
Invest on What Is, Not What Might Be
It’s not a bet I would make. At least not yet.
That’s not a knock against Cathie Wood, who is an extremely successful and popular investor. You’ve probably seen her on television.
ARK Invest’s description of itself is that it “focuses solely on offering investment solutions to capture disruptive innovation in the public equity markets.”
I’m on board with that. The most innovative and disruptive companies are often the fastest-growers whose stocks are getting gobbled up by Big Money. They also can surge for a long time – longer than most people expect – and snowball those profits.
That’s why I talk a lot about innovations and high-powered megatrends that are changing our world, like artificial intelligence, quantum computing, next-generation networking, and robotics, which we just covered one area of in the new TradeSmith Investment Report issue.
It looks as if we differ in which stocks to buy and when to buy them. I rely on data and quantitative analysis, making my investment decisions based on what we know today and how well it forecasts future prices. I rely less on what I think could be, should be, or will be… however many years into the future.
ARK Invest folks have cited Tesla’s leadership in self-driving technology, which is true. It’s also true that there have been well-publicized problems, some of which have produced tragic results. Tesla might well correct the problems, but we don’t know that for sure, and we certainly don’t know how long it would take.
Electric vehicle sales in general are also down. Data confirms this, and it’s a big reason TSLA has been under pressure. It doesn’t mean the end of EVs or even related investing opportunities, but again, we don’t know how long it might take for growth to reaccelerate. We can make a guess – even an educated guess – but in the end it’s still a guess.
That’s why I spent a lot of time, effort, and money developing my Quantum Edge system that zooms in on the factors – data that we have right now – that most reliably predicts future prices.
What it says about Tesla is actually quite interesting.
Using my system, I can count on roughly 70% of stocks making good money in the coming months. With a score below 50, TSLA’s odds go down considerably.
But – there’s always a “but” – this is where things get interesting.
Notice the huge discrepancy between Tesla’s extremely low Technical Score of 26.5 and its impressive Fundamental Score of 75.
Fundamentals measure the strength of the business, while technicals measure the strength and trading characteristics of the stock. The data tells us we have a fundamentally solid company – even after the latest earnings disappointment – whose shares are in the tank.
I’m not a value investor, but you can see how that could be a buying opportunity.
As one of my current research projects, I’m digging deep into my Quantum Edge system (and nearly 34 years of data) to analyze stocks with low technical scores but high fundamental scores. What are the chances they will rebound? How much might they bounce?
It’s a ton of data to pore through, and I don’t have final results yet, but early indications are that such a setup can prove to be a good buying opportunity. I’ll keep you posted as the project progresses.
For now, I can’t say with enough confidence whether Tesla will rocket higher in the coming months or years. I also can’t say it won’t. And that uncertainty is a dealbreaker for me. There are other stocks out there that give me a high probability of big profits.
Perhaps the major red flag for me is Big Money, which has abandoned TSLA for going on nine months. My system hasn’t picked up any buy signals in that time – which is a long stretch for such a popular stock – but it has picked up six sell signals in the last seven weeks. Including one just yesterday.
Cathie Wood may be right, and TSLA may become a $2,000 stock, but the data doesn’t confirm that with enough certainty at the moment. I have owned TSLA for a while, but my data says it’s not the time to buy.
In fact, the data shows it’s a longshot – at least at the moment. Sure, you can hit it big with a longshot, but the odds are you won’t.
Talk soon,
Jason Bodner
Editor, Jason Bodner’s Power Trends
P.S. Not only do the top-rated stocks increase your profit potential, but they are also less risky as a rule.
For example, the 18 stocks currently in my TradeSmith Investment Reportportfolio have an average Quantum Score of 76.6.
They also have an average gain of 27.8%, with the two stocks that are down off 2.5% on average.
