Investment Bets That Were in the Spotlight This Week

Wild Ride

Is the Bitcoin juggernaut faltering? After hitting a record of almost $42,000 on Jan. 8, the digital currency tumbled to a low of around $30,000 just a few days later. While the coin has recovered, wild swings have left investors divided on whether this is a healthy correction or a sign of an impending collapse.

Believers point to increased institutional acceptance of the coin, its potential to join the likes of gold as an inflation hedge and just the sheer amount of money looking for somewhere to go in an era of record low rates. Skeptics argue it has no intrinsic value and that it’s a speculative bubble. The U.K.’s financial watchdog warned this week that consumers should be prepared to lose all their money if they invest in cryptocurrencies.

Read more: Is Bitcoin Boom a ‘Better Gold’ or Just Another Bubble?

What’s next? Expect extreme volatility. “Being Bitcoin, a 10% range intra-day is a mere flesh wound to the digital asset, in a world where tradeable versus investable is seriously blurred,” said Jeffrey Halley, senior market analyst at Oanda Asia Pacific. “The digital Dutch tulip could easily be $42,000 again tomorrow or could drop through $30,000 and turn from Dutch Tulip to Dutch Elm disease.”

Electric Competition

Chinese carmaker Nio has Elon Musk’s Telsa firmly in its sights. This week, the Shanghai company unveiled its first sedan model that will pit it against international competition. But the “star of the show” was a new battery technology that promises to boost driving range substantially. 

The news drove the stock to a record high, pushing it’s market capitalization to $104 billion — bigger than General Motors and Ford Motor combined.

As for Tesla, it’s been on an astonishing run. The U.S. electric-vehicle giant’s growth has propelled valuations across China’s EV industry, which boasts homegrown rivals and supplies parts to American companies. Fujian-based battery maker Contemporary Amperex Technology, for example, is up about 220% the past 12 months.

While domestic demand is strong — Chinese auto sales rose for a fifth straight month in November on electric vehicle purchases — it’s unclear if models from companies such as Nio appeal to Western consumers. At the moment, the firm only sells its cars in China. But it has flagged plans to enter the European market as early as the second half of 2021.

What’s next? “We see this battery as a game-changer and expect it to give Nio a first-mover advantage,” Kelvin Lau, an analyst at Daiwa Securities Group Inc., told clients, adding that the technology could give the new sedan a driving range of more than 1,000 kilometers (621 miles). He has the highest price target on the Street at $100 (it’s currently at about $60). Fellow analysts largely share his view: the company has 11 buys, six holds and only two sell ratings, according to data compiled by Bloomberg.

Chewy Factor

Gaming retailer GameStop’s decision to appoint activist investor and Chewy co-founder Ryan Cohen to the board has sent it on a supersonic advance. The stock jumped as much as 37% Thursday and before ending at $39.91, more than double its closing price on Jan. 8.

Cohen has been pushing the struggling company to cut costs and increase the variety of its online offerings. Like other brick and mortar retailers, it’s been hit by footfall declines. Traders now piling into the stock are betting that Cohen will either revitalize the retailer — or sell it off. 

Professionals though are skeptical — the stock has only one analyst buy , and short-selling bets against the company have climbed over the past year. 

What’s next?  Gordon Haskett analyst Don Bilson said it wasn’t really clear what got the ball rolling on a “vicious” rally. Short sellers trying to cover positions is one likely explanation. The Street’s consensus target price is $12.36 — implying a roughly 70% downside.

Pandemic Payoff 

U.K. online fashion retailer Asos got another bump this week after upgrading its profit outlook as renewed lockdowns in the U.K. boosted orders and decreased returns. Sales in the first quarter jumped 24%, well ahead of expectations, and investors were also cheered by a lower proportion of customers sending back clothes.

The stock rose 4% on the news before falling back, though it’s still up 63% from a year ago.  The bet from investors is that a move to online , well established before the pandemic, is now entrenched — especially in places like the U.K. where the shift was gaining momentum anyway. Other retailers with a strong digital presence such as Next have also benefited — its stock is at a 52-week high.

That’s in contrast to the destruction on the high street of brands that have been caught short: companies such as Topshop owner Arcadia Group and Debenhams having collapsed into insolvency.

There was one note of caution in Asos’s update though — the weaker economy. Whether online or in-store, people still need to have the money for new clothes. 

What’s next? “Asos’ 20-something customer base makes the retailer particularly vulnerable to squeezed incomes,” Bloomberg Intelligence analyst ” target=”_blank”>Tatiana Lisitsina said. 

Normality Hopes

The poster child of the gig economy is having a bit of a moment. Airbnb shares are up about 20% this week and the online vacation rental marketplace climbed above $100 billion in market value. Shares are up more than 160% since going public in December.

That’s despite news  it be cancelling reservations in Washington, D.C. during the inauguration of President-elect Joe Biden due to safety concerns. Investor bullishness is driven by hopes that the rollout of the Covid-19 vaccine will drive a rebound in consumer travel. Other vacation-related stocks, like TripAdvisor and Expedia, are also surging.

What’s next? “Airbnb remains well-positioned to expand its share in online travel bookings post-pandemic due to its scale and brand recognition in alternative accommodations,” Mandeep Singh from Bloomberg Intelligence said, though he warned that U.S. President Donald Trump’s executive order blocking popular payment apps WeChat Pay and Alipay could be a headwind for bookings in Asia.

— With assistance by Bailey Lipschultz, and Joanna Ossinger

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