In today’s top stories, ARK raises its price target on Tesla stocks, Twitter takes steps to prevent Elon Musk’s buyout plans, while Apollo Global Management could join Musk’s bid to buy the social media platform. Meanwhile, analysis shows that index funds may make similar returns to meme stocks, and Morgan Stanley warns of weak earnings forecasts for the first quarter of 2021.
ARK ups Tesla estimates.
The investment firm, which made prolific returns in 2021 on the back of its Tesla [TSLA] stake, released a revised model for how it estimates the electric vehicle maker’s share value. “Our five-year price target has increased more than 50% to $4,600,” tweeted ARK founder Cathie Wood. The company is forecasting Tesla shares to reach $3,000 by 2025 but likely to be valued between $2,900 in a bearish scenario and $5,800 at its most bullish.
Twitter is taking tactical measures to prevent Tesla CEO Elon Musk’s move to buyout the company for $43bn, the Financial Times reports. The defensive measures, which are what’s known as a poison pill, were approved by the Twitter [TWTR] board to keep Musk from buying over 15% in the company at $54.20 a share, which Musk had said was his “best and final” offer. Amid the news, founder Jack Dorsey tweeted that the board has “consistently been the dysfunction of the company”.
Apollo may join Musk’s Twitter bid.
Private equity fund Apollo Global Management [APO] is looking to join Elon Musk in a bid to buy Twitter, reports The Wall Street Journal. Musk was sending mixed messages over the weekend, despite Twitter’s rebuff. He hinted in yet another tweet of a potential tender offer to buy the social media company. Apollo’s interest is part of a growing group of other players like Morgan Stanley, which are increasing the chances of a takeover.
Away from meme stocks.
Analysis by MarketWatch suggests that investors can make similar returns to that of meme stocks by parking money in index funds, which don’t have nearly as much volatility. Short-term gains in these stocks, however, can seem quite enticing, as a basket of 16 meme stocks was up by an average 49% over a two-week period in March. Key meme stocks like GameStop [GME] offered returns of 143% during the same period, while the ARK Innovation ETF [ARKK] gained 28%. However, over a longer period the returns even out, shows the analysis.
Weak earnings outlook.
Morgan Stanley is concerned about the weak quarterly earnings forecasts being issued by companies for the January to March period, reports Seeking Alpha. “Earnings revisions breadth for the S&P 500 has resumed its downtrend over the past two weeks and is once again approaching negative territory,” said a note to investors. This could potentially imply a larger number of earnings downgrades from the investment advisor by the end of this earnings season rather than upward revisions.
A price target upgrade by ARK may be a precursor catalyst to strong numbers from the electric vehicle maker, which are due to be announced on Wednesday. Tesla is expected to record revenue of $17.8bn for the three months ending 31 March, representing a 71.2% year-over-year rise. Earnings per share are also forecast to grow by 143% from the year-ago quarter to $2.26. Commentary on the company’s performance and manufacturing in China will be keenly followed.
Investment banker UBS estimates BHP [BHP] will report a 3% year-on-year jump in Western Australia iron ore production to around 68 million tonnes in its upcoming earnings release. A resurfacing of demand for iron ore around the world, particularly in China after a slump during the pandemic, and rising prices of commodities are expected to make the BHP share price shine post-earnings.