Tesla's (TSLA) investment in Bitcoin (BTC-USD) has garnered the electric vehicle company about $1 billion in profits — at least on paper, according to estimates from Wedbush Securities Managing Director Dan Ives.
"That’s more than all they made on EV vehicles in 2020, but that continues to be the double-edge sword. It’s going to add risk to the story, and we’re seeing that in terms of the volatility," Ives told Yahoo Finance Live on Monday.
Earlier this month Tesla announced it had invested about $1.5 billion in bitcoin and may accept the cryptocurrency for payment of products in the 'near future.' That day the price of bitcoin shot up to new highs, surging nearly 14%.
Despite the recent price movements in cryptocurrencies, Ives believes Bitcoin is still a "sideshow" when it comes to the Tesla story.
"Most investors I talk to still view the goalposts relatively contained in terms of the assets, and it’s a side show because ultimately the overall story here is the transformational EV story," said Ives. "Right now it’s Tesla‘s world and everyone else is paying rent in terms of EVs."
Ives doesn't see the moves in cryptocurrency as part the overall valuation of the company.
"I still view Bitcoin as not being factored into the price. If that starts to be 3 to 4 billion [dollars] that they invest or more, then that starts to be something more significant... but right now we think China alone is worth $100 per share." said Ives.
"We still believe although a ripple effect, less than 5% of public companies will be investing in bitcoin over the next 12 to 18 months until at least there are more regulatory goal posts put in," said the analyst.
CEO Elon Musk mentions of Bitcoin and other cryptocurrencies are enough to move prices. Over the weekend — responding to a tweet - Musk indicated Bitcoin and Etherium (ETH-USD) could be high. That sent Bitcoin well below $50,000, though it jumped back around $53,000 during Monday's session.
That said, BTC & ETH do seem high lol
— Elon Musk (@elonmusk) February 20, 2021
Shares of Tesla on Monday were down more than 4% as they have recently broken some key support levels. The stock was sitting around $870 in early February. It touched an intraday high of $900.40 on January 25th.
"I think we’re just in the early innings of the EV story playing out. That’s why Tesla I still think— this is $1 trillion market cap [company] over the coming months," said Ives.
Ines covers the U.S. stock market. Follow her on Twitter at @ines_ferre
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