Ahead of Tesla results, Cathie Wood says Wall Street’s valuing it all wrong

It’s a softer start to the week, with stocks tilting south, and a slump for China and Hong Kong stocks amid a technology crackdown. Bitcoin headed the other way, thanks in part to a help-wanted ad from Amazon.com.

Speaking of tech, we’ve got all the heavy hitters rolling out results this week — Apple
AAPL,
-1.64%
,
Microsoft
MSFT,
-1.24%
,
Google parent Alphabet
GOOGL,
-2.12%
,
Facebook
FB,
-1.52%
,
Amazon
AMZN,
-2.45%

and Tesla
TSLA,
-2.26%
,
with the electric-car maker’s results due after the close of markets on Monday.

Our call of the day comes from Cathie Wood, founder of ARK Invest, whose flagship ARK Innovation exchange-traded fund
ARKK,
-2.66%

has seen a bumpy July thanks to market volatility. But Wood, who has not been without her critics, doubled down on her fund’s forte — disruptive technologies and innovative business models and their importance in a portfolio.

In the first of a series of interviews that published Monday on Real Vision, Wood zeroed in on shortcomings of Wall Street, which she said needs more specified technology analysis. She highlighted its approach to Tesla as one example.

Wood’s base case calls for shares of the EV giant to hit $3,000, which is viewed as “crazy,” given shares are closer to $700, she noted.

“We believe the reason there is such a big inefficiency in Tesla’s valuation is the short-term time horizon of analysts and the wrong analysts following it,” said Wood, who explained that Tesla is a multifaceted technology company, but being covered by Wall Street auto analysts.

“Tesla is a technology company, but it’s not just one technology company,” she said, pointing to energy storage, robotics, artificial intelligence and software-as-a-service. “So we have three analysts building the Tesla model,” she said.

How big is her overall disruptive and innovative vision overall? She said market capitalization in public equity markets focused on transformative innovation was about $7 trillion in 2019, then doubled in 2020 to $14 trillion.

“And we believe that number is going to $75 trillion plus during the next five to 10 years and probably will account…for more than all of the appreciation in the equity markets because..the other side of disruptive innovation is creative destruction, so the traditional benchmarks today are being increasingly populated by value traps cheap for a reason because they are going to be disrupted or destroyed,” said Wood.

It will be “critically important to get innovation right and I do not believe traditional research departments are set up to do that right now,” said the money manager. You can check out part one of her interview here.

Big tech trouble in China and Bitcoin busts out

China
000300,
-3.53%

and Hong Kong
HSI,
-4.22%

stocks got hammered, led by technology names, after Beijing announced an overhaul of the tech education sector. Shares of U.S. -listed New Oriental Education & Technology Group
EDU,
+9.78%

were among those hit.

China also ordered tech conglomerate Tencent
700,
-8.98%

to end exclusive contracts with music copyright holders — U.S.-listed shares of Tencent Music
TME,
-5.93%

are sinking.

China is also blaming the U.S. for a stalemate in relations between the two at the start of high level bilateral talks.

Bitcoin
BTCUSD,
+1.00%

surged over the weekend, and is hovering at just over $38,000. Some are pointing to an Amazon job listing for a digital currency and blockchain product lead, which has led some to speculate the e-commerce giant could start accepting cryptocurrencies. Bitcoin has been recently boosted by positive comments from Tesla CEO Elon Musk, Twitter
TWTR,
-0.58%

CEO Jack Dorsey and ARK’s Cathie Wood.

Share of defense group Lockheed Martin
LMT,
+1.62%

are down after profit falls short, while shares of toy maker Hasbro
HAS,
-3.17%

is rising after a big profit beat. Tesla is coming after the bell.

In deal news, diagnostics, life science and food company PerkinElmer
PKI,
-2.05%

is buying BioLegend,  life science discovery and research company in a $5.25 billion cash and stock deal. PerkinElmer shares are dipping.

Lucid Motors stock is set to trade on the Nasdaq Monday after the electric car group’s merger with a blank-check company was approved Friday.

The markets

The Dow
DJIA,
-0.48%
,
S&P 500
SPX,
-0.78%

and Nasdaq Composite
COMP,
-1.59%

are softer to start the week. Oil
CL.1,
-0.47%

is a shade lower, while the yield on the 10-year note is down 1 basis point to 1.27%.

The chart

On the COVID-19 front, a drop in the U.K.’s delta-fueled cases is raising some hopes that there is an end in sight for climbing infections elsewhere.

“The U.K. saw a relentless parabolic surge in cases.  This lasted 45 days.  And even without any mitigation measures, the UK cases have been falling now for the past week,” Thomas Lee, founder of Fundstrat Global Advisors, told clients in a note. ” If the U.S. follows the template of the UK, daily cases in USA might be peaking in the next 12 days.”

Not everyone agrees with this view. One recent study predicts U.S. cases fueled by the delta vraiant will climb through summer and fall, peaking in mid-October.

Random reads

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Harry Byrne

Harry Byrne

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