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Why Tesla Stock Jumped on Wednesday | The Motley Fool

What happened

Shares of electric-car maker Tesla (NASDAQ:TSLA) rose sharply on Wednesday. The stock rose as much as 5.2%. As of 1:10 p.m. EDT, however, the stock was up 4.7%.

The automaker’s stock was likely trading higher due (in part) to a sharp jump in Bitcoin prices. In the past, Tesla shares have moved sharply up or down on days of volatile Bitcoin trading. Investors often associate the car company with Bitcoin because it has bought $1.5 billion worth of the cryptocurrency. But an upbeat day for some growth stocks like Tesla may be helping as well.

So what

Bitcoin has rebounded more than 15% after briefly sinking below $30,000 on Tuesday. As of this writing, Bitcoin is trading near $34,000.

Some investors may be concerned about how Bitcoin’s price at the end of Tesla’s second quarter could impact the company’s reported profits. The recent rebound in the cryptocurrency’s price may soothe some concerns about how a falling price in the digital coin could impact the company’s earnings report — though there’s no telling where the digital coin will be trading at the end of the period.

Tesla shares may also be getting a boost from recent momentum in growth stocks.

Now what

Investors should keep in mind that Tesla’s Bitcoin investment is small relative to the automaker’s total cash balance. The company wrapped up Q1 with $17.1 billion of cash and cash equivalents. Tesla’s Bitcoin investment is particularly small in relation to the company’s $630 billion market capitalization.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.



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