Billy Beane SPAC Inks Deal with SeatGeek

Following up on my August 5th post about a handful of SPACs, we recently heard that RedBall Acquisition Corp (RBAC) has agreed to acquire live event ticketing platform SeatGeek in a deal expected to close during Q1 of next year. There was much speculation that RBAC would wind up buying a professional sports franchise (and supposedly they did have discussions with the Boston Red Sox at one point), but I actually prefer a deal like this to one where the market would likely yawn unless an elite team was involved.

SeatGeek is one of a few next generation online ticketing platforms that not only aims to simplify the overall live event ticketing experience, but also use a mobile platform to integrate other features into the customer interaction. Reselling tickets you can no longer use and ordering concessions at your seat being two of many they are working on.

As with many SPACs this deal is full of lofty projections about revenue growth and underlying profitability in the out years. I am not going to claim their figures are easily attainable and would definitely take them with a grain of salt, but even if we discount them a fair bit, the deal does not look too expensive.

At a $10 share price, the SPAC holders will own just south of 30% of SeatGeek at closing, with an overall equity value of ~$2 billion. Given we are dealing with a software-based platform company with high gross margins, the overall price to sales ratio of 5.8x seems fair (2022 revenue projections are $345 million - this number seems plausible given we are almost into next year already… whereas the out years are likely more aggressive and uncertain).

That said, the deal is not without plenty of risk. SeatGeek is not profitable and doesn’t expect to be until 2024 at the earliest as they rapidly invest in the platform. If we assume their 2025 revenue projection of $1.2 billion is the most bullish scenario (not base line), then the stock looks cheap, but I think a lot needs to go right for them to be able to grow that quickly. Still, even at half that sales level ($600 million), a $2 billion equity value isn’t a stretch in my view.

I also like that sports people are buying this company, as they likely will be better in tune with the desires of customers than any run of the mill Silicon Valley-based software company.

RBAC stock has gone from $9.75 to the $9.90-$9.95 range on the deal announcement, so cash-alternative investors have made their money and have another few cents of risk-free upside if they choose to redeem. While I haven’t decided yet, I think I am leaning toward keeping shares in SeatGeek and seeing how the company’s growth plays out. It won’t be a large holding by any means, but there is plenty of long-term potential and I like the people behind the partnership.

Full Disclosure: Long shares of RBAC at the time of writing, but positions may change at any time

With Meme Stock AMC Staying Elevated, Let's Revisit The Numbers

I get a lot of questions on AMC Entertainment (AMC) as the meme stock crowd continues to buoy the shares despite the underlying business continuing to burn millions of cash per day, so let’s update the numbers behind the equity since my last post on the topic was seven months ago.

From a fundamental perspective, the business itself remains in the red despite being open for business, so I think continuing to value the theater chain based on 2019 actual results is a fair way of taking an optimistic view of the future (assuming normalcy eventually does return to everyday life). AMC owns fewer locations now than they did in 2019, but inflation can probably offset enough that we can safely use the $670 million of 2019 EBITDA in this exercise.

To refresh, here is what the numbers looked like back at year-end 2019, when things were (relatively) good for the company:

Cash: $265 million | Debt: $4,753 million

Share Count: 104 million | Stock Price: $7.24

Equity Value: $753 million | Enterprise Value: $5,241 million

EBITDA: $670 million | EV/EBITDA multiple: 7.8x

The stock has now moved up to above $46 while the share count has nearly quintupled. Using the 6/30/21 balance sheet (and 2019 actual EBITDA), here are the updated figures:

Cash: $1,811 million | Debt: $5,500 million

Share Count: 513 million | Stock Price: $46.09

Equity Value: $23,644 million | Enterprise Value: $27,333 million

EBITDA: $670 million | EV/EBITDA multiple: 40.8x

As you can see, the stock price today has nothing to do with fundamentals, but that statement has been echoed plenty of places. Long term, a short position here will almost certainly pay off, but the timing is the big question mark. AMC has been able to stay out of bankruptcy so far by selling more than 400 million new shares over the last 18 months. Even at their first half 2021 cash burn rate (~$3.2 million per day), they had 18 months of cash in the bank at the end of June.

Therefore, the story as we head into and traverse 2022 is where the next influx of capital comes from in order for them to roll over their debt, repay deferred rent from the pandemic (around $400 million and not included above) and get back to cash flow positive operationally. It seems like a long shot that existing creditors would be excited to dole out more funds, so additional stock sales, if allowed by the shareholder base, is the best bet for next year. If credit gets tight, however, and investors balk at buying more stock, the tide could shift pretty quickly.

Still, we don’t (and can’t) know the timing, even though the end result looks pretty obvious; the business almost certainly can’t sustain a $27 billion E/V on its own, and it likely can’t service $5.5 billion of high-cost debt either. Grab your popcorn, as the next 12 months should be very entertaining.

Full Disclosure: Short shares of AMC at the time of writing, but positions may change at any time

While Many SPAC Deals Overload On Speculation, Some Are Worthy Of A Look

It says a lot about where we are in the cycle when sponsors of special purpose acquisition companies (SPACs) can easily and relatively quickly make tens of millions of dollars merely by taking a shell company public and choosing an acquisition target, before long-term success could ever be determined. But with the free market system we need to take the good with the bad (so long as legalities are considered), so as much as I think the SPAC structure is a strange way to accomplish a goal, it is probably short-sighted to write off the pathway completely and never consider investing in any of the deals.

Don’t get me wrong, assigning a multi-billion valuation to a revenue-less, concept company based on rosy hypothetical financial projections for 2026 makes no sense to me, but here and there we can find real businesses reaching the public markets through a SPAC. As with any other security, what is important to analyze is what you get and how much you pay.

And for some pre-deal SPACs, you can make a risk-free bet if the shares are trading below $10 each. Like the deal? Hold on for the long term? Hate it? Cash out with no harm done.

Specifically, I like some SPACs where the sponsors are legit and the shares are at a discount because we don’t know the target yet. Something like SPGS from Simon Property Group or RBAC from Oakland Athletics EVP Billy Beane. You essentially get a free call option on their process.

Some busted SPACs also look interesting post-deal. Wholesale mortgage lender UWMC can be had for $7 and change - quite a big discount to the deal price. If you think rates stay relatively low and housing demand will stay firm, it’s interesting.

And then there are announced deals that haven’t yet closed. The most intriguing to me is the local neighborhood social media platform Nextdoor, which fetched $4 billion+ from KVSB and only trades at a small (~2.5%) premium after peaking above $11.50 per share. A big multiple to current revenue with no profits? Sure, but longer term the platform seems to have staying power, a long growth runway, and numerous monetization opportunities. All for less than $5 billion; not bad in today’s market.

All in all, most SPACs get a chuckle from me, but it’s still worth looking at some because with the market trading above 20x next year’s profit forecasts there are fewer and fewer bargains out there.

Underlying Earnings Continue to Support Strong Market Action

Most of the commentary I hear around why the U.S. stock market has gotten off to such a strong start in 2021 focuses on governmental fiscal stimulus and the Federal Reserve’s intent to keep their target funds rate low for as long as the data can possibly justify doing so. While strong consumer spending will help businesses rebound from the pandemic, and low rates support elevated valuation multiples, I think the underlying profits being generated now, and those expected over the next 12-18 months are even more of a tailwind for stock prices.

As 2021 began I wrote in my quarterly client letter that consensus expectations for a record high S&P 500 profit figure in 2021 (easily surpassing 2019 levels), while certainly possible, didn’t seem like a sure thing. With the index trading for nearly 23x those estimates back in January, I was cautious about the potential upside this year.

It appears that cautiousness will prove to be unnecessary. Since January 1st, the 2021 profit forecast for the S&P 500 has actually increased (and done so meaningfully) from $164 to over $185. As the S&P has risen about 10% so far this year, profit expectations have been bumped up even more (about 13%). What that tells me is that the narrative of an economic boom post-pandemic (surely aided by government stimulus) is alive and well, and is very possibly going to result in absolutely stellar corporate profit growth.

While I would love for the U.S. market to be cheaper (we are trading at 20x 2022 profit estimates), I take comfort in the fact that the core fundamental driver of equity prices (earnings) is at least going in the direction it should be to justify these prices. Time will tell if the 2022 estimate ($208) can be surpassed as well, but if that number is in the ballpark, and the 10-year bond stays under 3% (plenty of room to lift from here without being a big deal), one can make the argument that the market generally is not in a bubble. And the recent calming down of the likely bubble in the profitless subset of the tech sector is a welcomed development too.

As is should be for those of us who focus on longer term fundamentals rather than day to day headlines, I think earnings will tell the story this year and next and for that I am thankful (until we have reason to fear a material economic slowdown).

Is Casper Worth A Look After A Sleepy Public Market Debut?

While I am not an active investor in the IPO market (if the smart money is selling, why would I want to pay a premium to take stock off their hands?), I do sometimes get enticed by busted IPOs; those that were thought to be up and comers but quickly faded into the background. Casper Sleep (CSPR) seems to fit this bill and I find it to be an interesting small cap to dig deeper into.

Casper took the sleep sector by storm when it started selling mattresses through the mail in 2014. Don’t like it? Just send it back, no worries! Consumers rejoiced and sales went from zero to $100 million by year two and to $250 million by year four. As competitors emerged shortly thereafter, the company lost some of its first mover luster and by the time executives took the firm public in early 2020, investors were past the point of caring (the pandemic probably didn’t help either). After initially trying to offer shares between $17 and $19 each, Casper’s IPO priced at $12 and the stock immediately sank even further. Today you can get your hands on them for $7.50 apiece.

Okay, so why on earth would I want to spend time looking at a money-losing mattress company that has a bunch of competition and no investor interest? Well, as with most value investors, the answer probably has something to do with the price.

At $7.50 per share, the equity value is about $300 million. Despite never having been profitable, Casper is paring losses every year, with EBITDA margins of (28%) in 2017, (25%) in 2018, (18%) in 2019, and (12%) in 2020. Gross margins are around 50%, so there is no reason the company cannot reach profitability, and probably could right away if they wanted or needed to. The balance sheet is in decent shape (net cash of $23 million as of December 31st), so management’s current plan to continue shrinking losses while growing the business does not seem overly worrisome.

Meanwhile, despite their competitors Casper continues to grow revenue and expand its product lineup. Sales doubled from 2017 to 2020, to $500 million, and are expected to continue to grow in the mid teens this year. Based on current consensus forecasts, the stock fetches a forward price-to-sales ratio of less than 0.50. By my math, the bar has been set very low for this company.

Let’s assume Casper can turn profitable over the coming few years and that investors would be willing to pay 15 times earnings for the business, neither of which I think are aggressive inputs. At one-half of annual sales, the stock is pricing in a roughly 3% net profit margin at maturity, and you get any future sales growth for free. It’s hard to argue the stock is overvalued here, unless you think the business model is unsustainable or that there is no room for Casper to take share in the sleep-related markets they enter in the future.

While admittedly not the most exciting business in the world, I think their brand might be strong enough to meet or exceed Wall Street’s currently low expectations, as well as some fairly conservative assumptions I settled on. So what could the future path for the stock be?

Well, let’s say Casper meets their 2021 sales forecasts, grows those sales by 10% annually from 2022 through 2024, and reaches a 5% net profit margin in 2024. That would bring 2024 earnings to $39 million. At 15 times, the stock would essentially double from here.

And there is potentially more upside than that. What if sales exceed those levels (as millennials continue to get married and buy homes), the P/E multiple does not fetch a discount to the overall market, or a bigger player comes along and decides to buy the company outright for a nice premium?

Don’t get me wrong, this is far from a sure thing. Small caps that are losing money come with plenty of risk. But given how low expectations are and based on the current market value of the business, I think Casper might be unloved, unnoticed, and undervalued as a result, which means it’s worth watching.

Olo IPO Highlights Direct vs Third Party Online Food Ordering Competitive Dynamics

There are a lot of bullish opinions on the long-term prospects for third party delivery apps like DoorDash (DASH) and Uber’s (UBER) food delivery segment. When thinking about their business models, the stumbling block for me has always been the fact that they take 15-30% of the order value for themselves (which in many cases is most or all of the restaurant’s profit on the order) and they have to supply the labor as well, which presents headwinds like rising minimum wages and the debate over whether their drivers can be contractors or must be classified as employees.

The end result is a tough hill to climb to profitability (during a pandemic year in 2020, when the business should have crushed it, DoorDash brought in nearly $3 billion of revenue but lost more than $300 million). Even if they expand successfully to serve traditional non-food retailers too, the same issues apply.

Looking at it from the outside, it seems to me the better bet would have been to build the technology platform and simply sell it to the restaurants. You wind up with a high margin software as a service business that would get a huge valuation on Wall Street, and you let the restaurants hire their own drivers to fulfill the orders that come in. Fewer parties involved directly in the order makes it more efficient and allows restaurants of all sizes to compete with the likes of the big pizza delivery chains, who have a head start with a driver network and online ordering technology.

Interestingly, this is the path that Olo (OLO) has taken and the software provider will go public today at a $25 per share offer price. The stock has yet to open, so I can’t comment on valuation, but I am interested to dig into the company more because I far prefer their business model (charge a monthly service fee per location plus a small transaction fee per order that declines as volumes grow) to one that literally makes you a middleman between the customer and the food.

It will probably not be a winner take all situation. Large restaurant chains with huge order volumes will be able to negotiate better with the likes of DASH to reduce fees and make delivery orders marginally profitable. But smaller independent chains likely can’t do the same, and could very well prefer a scalable software solution where they control the customer experience directly (maybe emphasizing carry out more than delivery) and don’t have to give up all of their margin to stay relevant in the marketplace.

As a value-oriented investor, I hope Wall Street discounts the Olo model and affords it a reasonable valuation, as they are a leader on the software side and their model seems to make a lot of sense if you want to be profitable in the online ordering food space. Time to dig into their financials and see where the stock trades in the early going.

Digital Art From Obscure Artist Fetches Nearly $70M

File this under things that make no sense whatsoever:

Beeple NFT becomes most expensive ever sold at auction after fetching over $60 million

Should Investors Freak Out About Interest Rate Normalization?

So far in 2021 the yield on the benchmark 10-year government bond has surged from 90 basis points to over 150 (hopefully you refinanced your mortgage last year) and higher rates have many investors concerned given the rapid rate of increase. Though the financial markets have become a bit more volatile lately, equities have been range-bound and peak-to-trough losses have not been more than 5 percent at the worst point.

So how much concern should there be about rising rates? Given that equity prices are a function of profits as much as they are about interest rate sensitive metrics like P-E ratios, I think we really need to look at the big picture. In that sense, a 10-year bond yielding 1.5% is pretty tame regardless of where it was a few months ago.

Right now the S&P 500 index trades for about 23 times projected profits for this year. If that metric seems high, it’s because it is. Pre-pandemic the S&P 500 traded for about 20x, the 5-year average multiple was around 19x and the 10-year average was around 17x. If we assume coming out of the pandemic-induced recession that interest rates will normalize and the market reverts to a 19-20x earnings multiple, then we can quickly conclude that stocks might be roughly 15% overvalued at present.

However, the reason why market timers have a bad track record is that there are several different ways that overvaluation could cure itself; a swift double-digit market decline being only one. Coming out of a recession only complicates this because corporate profits are rising again and fiscal stimulus at the governmental level is elevated, which makes the odds of an overshoot on earnings more likely than normal.

Since financial markets are forward looking, investors could very well be looking out to 2022 already, to get an idea of what a normalized profit picture looks like. What if earnings grow by double digits again in 2022? In that case, S&P profits could reach $190 next year, making the current 3,900 level on the S&P 500 look reasonable (the same earnings multiple we saw heading into 2020). While it is hard to see how the market is materially undervalued at present, there is certainly a path for a relatively calm normalization of profits and equity market valuation here in the United States.

While most are focused on interest rates right now, I actually think profits will hold the key over the next 12-24 months. In the 5 years pre-pandemic, when the S&P 500 averaged a 19x trailing P/E ratio, the 10-year bond averaged a mid 2 percent yield. Given the willingness of the Federal Reserve to keep rates low in the absence of inflation, I expect P/E ratios to remain high for the intermediate term. Whether stocks fall a bit, stay stable, or rise a bit, therefore, will depend on the pace of earnings growth.

And given that such a pace is likely to be strong in 2021 and 2022, there is a path for equity market valuations to normalize without a major market drop. Essentially, elevated valuations today can be corrected as long as corporate profits grow faster than stock prices over the next couple of years, which will result in a falling P/E ratio during economic expansion. With rates remaining low, equity investors are likely to accept such an outcome as a base case scenario and continue to allocate funds to stocks.

I would be much more concerned about a larger market decline (i.e. 20% or more) if we see profit growth sputter later this year and into 2022. Without consensus or above earnings, the path to a valuation normalization could become more treacherous.

I will leave you with some charts that show the relationship between rates and equity valuations over the last few economic cycles. I find them interesting because they indicate that recent equity market strength has not been vastly out of line with historical norms when interest rate levels are considered.

Author’s note: The charts below show P/E ratios for the S&P 500 computed using peak historical calendar year earnings, meaning that depressed earnings during recessions are not included. During recessions, earnings fall dramatically which increases P/E ratios and makes the market look more expensive even though stock prices have fallen. By using the previous cycle’s peak earnings instead, P/E ratios drop during periods of stock market weakness, which better denote the cheapness of stocks after large declines (see the 2008 period in the first chart as an example).

First, we have a chart showing the spread between the S&P 500 P/E ratio and the 10-year bond yield, which shows the large increase in stock market valuation during the late 1990’s dot-com bubble, as well as a return to high valuations in recent years.

While the last chart might make stock investors queasy, consider what it looks like when we add the absolute level of interest rates to the data. With rates falling generally over that period, rising valuations don’t seem as concerning.

The final chart below takes the one above and add linear trend lines for both datasets to show the long-term trend. Considering the slope of each trend line and what we would expect the relationship between interest rates and P/E ratios to be, the market’s pricing over time seems to have been quite rational (as rates drop, valuations increase, and in a relatively correlated fashion).

Reader Mailbag: Investing in the Online Gambling Market

Reader Question:

Online sports gambling has the potential to allow integrated gaming resort operators to scale their revenue dramatically beyond their physical footprint capacity. Do you see the online gambling opportunity evolving in a "winner take all" fashion or will multiple players capture a meaningful stake? Who do you think is best positioned at this early stage - established online betting companies or the integrated resort operators?

I have been amazed at the valuations being afforded to the online sports and casino betting operators in recent months. I understand that legalizing sports gambling across the country is going to expand revenue for the players in this space, as a lot of illegal bets will be moved over to legal platforms, but I think the jury is still out as to whether the ultimate profits generated from the increased revenue, and the impact on physical casino operations, will justify current valuations and expectations. Before I answer your question directly, let me share some thoughts on how investors might think about the profit potential for all of the competitors.

1) Although the “handle” (dollar value of all bets placed) of online sports betting is going to be a very large number, we need to keep in mind that very little of that trickles down to the bet taker.

The “revenue” generated from the handle (the pile of cash leftover after all winning bets are paid out) is typically a high single digit percentage of total bets taken. Out of that stack of money, each state is going to take a cut as a tax generator (this is why so many states are eager to accept bets in the first place). Some are more reasonable (Nevada takes 6.75% of revenue) than others (Pennsylvania takes a whopping 36%). And then don’t forget that casinos have operating expenses associated with sportsbooks, in the form of labor and technology.

All in all, let’s assume revenue equal to 8% of the total handle, a pre-tax operating profit margin of 50%, and a 15% average tax rate across the entire country. In that scenario, for every $1 billion of bets made, the casinos will net an all-in profit of $28 million. And they will have to pay income tax on that amount at the corporation level, which brings that figure down to about $22 million. Investors should think about that math when evaluating the public market valuations of the companies in this space.

2) If the gambling customer can whip out their phones and place bets on sports with an app, it certainly increases the odds that they will bet, but that is a double-edged sword because casinos have a lot of fixed costs and one of the ways they make money from their buildings is from ancillary revenue during an actual visit to their casino.

You visit to bet on a college football game on Saturday, but while you are there you eat at the buffet, have a few beers, and throw a few bucks on roulette during halftime. The casino winds up making more profit from that spending than they do on the actual sports bet itself. If you are betting from your couch at home, you eat your own food and drink your own beer. With a large fixed cost base, having less revenue being generated inside the four walls of your building is not the most efficient business model from an operating leverage standpoint.

Okay, so who do I think will be the winners in this space? I can easily see a handful of players taking the vast majority of the business. Penn National has dozens of physical properties scattered across the country (the most of anyone), so betters know them well. The online-only players like Draftkings and Fandual will get a lot of the folks who rarely visit casinos. That customer could also use the Fox app since they are watching on TV already. And a big chunk of the the Las Vegas business would seemingly go to MGM since they are the dominant casino operator on the strip.

So my guess would be that given the existing market positions and brands, those five would get the lionshare of the bets. How much? Hard to say, but it would not surprise me if the 80/20 rule roughly applies here.

Reader Mailbag: Merits of Shorting Tesla

Reader Question:

I am curious of your take on the benefits of shorting tiny amounts of TSLA at these levels (~$850). At +800B valuation there isn't almost any room to grow reasonably. The reward of shorting might not be very big, but neither appears to be the risk.

Many skilled short sellers often give the advice that shorting based solely on valuation is unwise. I suspect the reason is that while fundamentals do matter over the long term, in the near term, investor sentiment dictates stock movements more. The stock price action of Tesla over the last year shows this clear as day.

Accordingly, if you are early and nothing fundamentally negative occurs at TSLA for the next 6-12 months, then there is nothing stopping the stock from continuing to rise. While there are lots of positives that have already played out (S&P 500 addition, fortifying their balance sheet, etc), the list of negative catalysts is harder to pinpoint. It might be more of a lack of further positive news, which could halt the momentum, as opposed to negative news.

I think TSLA is a unique business situation, much like AMZN, in the sense that their founder and CEO is not going to constrain the company to just making cars and solar panels (just as Mr. Bezos didn’t stop at books and music). As long as that is the “story” bullish investors have at their disposal, you can almost justify any valuation, including the current near-$1 trillion level. And that is the potential problem with shorting it due to overvaluation. The bulls are not buying it because the valuation looks fair; they are buying it because they believe Elon will change the world, much like Amazon has.

Along those lines, the many comparisons of TSLA’s market cap with every other auto maker in the world (combined) are easily tossed aside as irrelevant. The same notion turned out to be right when comparing Amazon to Wal-Mart a decade ago. But what if every car company transforms their fleets to EVs over the next 20 years, won’t TSLA just be another car company? Perhaps, but what if they provide the batteries and software for the majority of the industry at that point? How much is that worth? I have no clue.

I am not trying to make the case that TSLA is a buy at current levels. I do find the valuation extreme for a manufacturing company. From 2012 through 2019 the stock fetched a year-end trailing price-to-sales ratio of anywhere between 2.5x and 9.0x. At year-end 2020 that metric was over 25x. Industrial businesses don’t earn profit margins high enough to justify that kind of valuation, but the bulls will tell me TSLA is really a software play and eventually will have the largest network of self-driving EVs on the planet. Do I have a strong conviction that they are all crazy? Not really. Amazon turned out to be a computer services company as much as a retailer, and might be adding logistics management and advertising to that list too.

I simply don’t know how we value that possibility with TSLA. Shorting Amazon on valuation has never worked in 25 years. While I am confident that Ford and GM won’t be software companies eventually, I can’t say the same for TSLA. Given this narrative and reality, it is hard to place a fair value price for the stock, and therefore, hard to know when to short and when to be long.

In your question, you state that there “isn’t almost any room to grow reasonably” from current levels. Given the above narrative, I am less confident. Can we really say with conviction that TSLA can’t double their market cap by 2028 (a 10% annual CAGR from here)? I can’t, just as I can’t say with conviction that the business is worth 5x or 10x sales instead of 25x. To your point, though, if you short a tiny amount, there is not a ton of risk. in doing so. I completely agree.

Is it going to be hard for TSLA to grow enough to justify the current valuation? Absolutely. Could the stock easily be $500 a year from now, making a short position today pay off nicely? Absolutely. But I think the more interesting question is “of all the stocks out there to be long or short, does shorting TSLA rise to make the top 10 or 20 highest conviction ideas you have with which to build a portfolio?” If so, then there is your answer. If not, then I would say why not take a pass and, as Mr. Buffett would say, put it in the too hard pile?

Another part of your question got me thinking. You wrote that “the rewards of shorting aren’t very big.” Given the unlimited loss potential of shorting stocks in general, it seems that a large potential gain could be considered a prerequisite for shorting anything, TSLA included. Something to think about, as I suspect some will agree and others won’t.

All in all, I think TSLA is emblematic of the current bull market in the tech space; one where future growth potential is valued highly and current valuations and corporate profits are not. As a contrarian, value-oriented investor, I am disheartened by that development (and I don’t think it will end well for many speculators), but we also don’t know if/when the tides will shift and by how much. Given that, I tend to think that taking a lot of pitches in the batter’s box is a fair approach, especially when there are so many easier investment options out there to take a swing at.

That said, if the equity market breaks down at some point this year, it is reasonable to think the momentum plays could lead on the downside, in which case TSLA could easily fall hundreds of dollars per share. There are arguments on both sides, for sure, so then it just comes down to how much conviction you have to ultimately decide it is worth betting on one of those potential outcomes with Tesla, versus other securities.