When the big reveal fails

ARK was teasing their new price target for TSLA for some time (I am going to start limiting my reddit consumption as my brain is starting to hurt from the overload of repetitive noise). As ARK is one of the biggest TSLA boosters such an event was expected to boost the failing TSLA price out of its downtrend to their new price target. Well, we got the news, it was unavoidable with a $3k price target, but the effect was more TSLA battery day (e.g., disappointment and confusion) than VW (excitement and stock price rise) as price failed to breach $700 (or indeed, even the highs from three trading days ago). Ominously, any redditors buying at the gap up open on the headlines were underwater by the end of the day. With a move that was in line with the rest of the market it seems all that deep analytical work on TSLA was wasted.

The report has already been characterised as puffery given the paucity of knowledgeable analytical content (Christopher Bloomstran on Twitter: “I see lots of student company write-ups and pitches. Most are better than yesterday’s $3,000 ARK Price Target Report for $TSLA. In reading the report its clear the motivation is to promote a higher stock price. The fantasy involved is simply spectacular… 1/” / Twitter). I cannot remember a more transparent attempt to grab headlines and boost price with so little analytical content since, well, their last wild price target (the analysis for which was equally head scratching–but in a bubble that does not matter until it does). Due to my allergic reaction to the last ARK “analysis” I encountered, I did not read their latest piece so I am basing my comments on the reaction of others who were forced to read the promotion. There was also some laughing about how their price target worked out to a massive percentage of the entire US GDP but these amateur critics are obviously not acquainted with the new math wherein a tiny market share company that cannot make money without massive government handouts and credits is worth more than most of the entire auto industry.

My only contribution on this point of boosting the stock price is that their timing was terrible as they released their report as price was already at the upper parallel. As one can see, the price could not breach the upper parallel (which is not surprising given the competitive losses suffered by TSLA among a whole litany of negative factors). Even if you wanted to go long TSLA, you would not want to buy at the least favourable entry point–the upper parallel.

In case you think my side note about terrible timing can be easily dismissed, I actually think it is the central point in this entire bubble. It does not matter if you put out a ridiculous piece with an insane price target as long as your timing is right. If your timing is right, you will be the next YouTube. Keep in mind many VCs tried to introduce streaming video before the infrastructure and customers were ready and they failed. The one key with YouTube was that its timing was ideal. ARK’s previous crazy price target piece was perfectly timed as factors beyond their knowledge and control, namely the massive infusion of liquidity due to COVID and other factors, pushed TSLA’s price beyond all reason. Of course the normal analysts were publishing $400, not $4,000, but ARK’s timing caught the wave perfectly and money flowed in as a result and reddit saw Cathie Wood as a genius as a result.

So why the panic? And considering the clown show that the insurance “analysis” turned out to be (see the twitter thread above for a classic takedown) it is very much looking like panic. My theory is that this gets back to what Jesse Livermore was noting about big round numbers. When a stock breaches $400 easily, then $500 is possible. If it fails to breach $700, as is being demonstrated in March, then $600 is possible. We shall see, but if a price target by the biggest booster to $3,000 cannot muster more than noise then $600 looks very possible (which, by the way, is the lower parallel). This then raises the question of why is it so important for ARK to hold $700 (being negative for the year does not help redemptions I suppose)? Weirdly, the one big green bar merely pushed TSLA to $700 off $600 and there was no follow through after that. The problem with failing to hold $600 is that $350 comes into play.

I cannot help but feel that ARK, in trying to replicate the magic of their previous wild price target, thought that somehow their “analysis” had something to do with the price move. They may be conflating lucky timing with content, however. Still, at least the TSLA analysis reminded me of the SCTY “analysis” back in the day.