The stock market is a popularity contest in the short term, but a weighing machine in the long term. At least that’s what Warren Buffett and Benjamin Graham, the fathers of value investing, think today. Today, investors can see this trend as attention has shifted from the technology sector to the world of cryptocurrencies.
Especially in the sense that in 2024, stocks with a lot of Bitcoin or other cryptocurrencies on their balance sheets experienced the wildest price movements, e.g. MicroStrategy Inc. NASDAQ: MSTR. The stock was an industry darling while it was hot, but now that Bitcoin is falling from its highs, it is up to 55% of its 52-week high in doubt.
While investors may become fearful of missing out if they don’t buy this sharp dip, other discounted stocks today may be better buys. One example can be given Tesla Inc. NASDAQ:TSLAas auto stocks fell to 77% from their 52-week high, or Advanced Micro Devices Inc. NASDAQ: AMD providing investors with one of the best discounts in the semiconductor industry at 53% from its 52-week high today.
Risks associated with MicroStrategy shares
Microstrategy today
As of 5:45 pm ET
- 52 week range
- $43.87
▼
$543.00
- Target price
- $479.25
Even though the stock has fallen to levels that would otherwise be attractive to buy, the business model does have some risk. Not only was he responsible for the stock’s success, but he may also have been responsible for its downfall. The reason is that the core software business doesn’t make any money.
So MicroStrategy buys Bitcoin for its balance sheet at the cost of dilution. In other words, the company is issuing shares to the market to finance its leveraged purchase of Bitcoin. While this is good for investors as Bitcoin rises, the leverage and volatility of this machine also becomes disastrous when the coin falls.
That’s why, while 55% of its 52-week high is attractive, MicroStrategy’s risk-reward profile is simply not worth investors’ capital or their time. Because of this, the two stocks will offer very different terms in the first quarter of 2025.
Tesla stock tailwind outweighs MicroStrategy discount
Tesla today
As of 5:45 pm ET
- 52 week range
- $138.80
▼
$488.54
- P/E ratio
- 112.45
- Target price
- $283.39
Following the tragic explosion involving a Tesla Cybertruck outside a Las Vegas hotel, shares fell 6.7% as investors reacted to the disturbing incident. Adding to the pressure, Tesla reported its first annual sales decline in more than a decade, signaling that the company’s stock is now facing serious challenges.
However, others who are value-minded will see Tesla selling more than 2 million vehicles in 2024, second only to the Chinese automaker. BID OTsMKTS: BDDF. The fact that oil prices are so low right now that they’re pushing gasoline prices down is usually a cyclical tailwind for EV sales.
When you add consumer lending trends to the mix, investors have the perfect storm to expect Tesla sales to decline. But that’s where it ends. Wall Street analysts, particularly those at Mizuho, continue to give the stock an “outperform” rating as of December 2024, this time along with a valuation of up to $515 per share.
To prove these analysts right, Tesla would have to grow by as much as 36% from its current position. The risks for Tesla stock at these discounts are factored into the price, giving investors a much better risk-reward profile as a potential future purchase.
Advanced microdevices: the new NVIDIA
Advanced microdevices today
Advanced microdevices
As of 5:45 pm ET
- 52 week range
- $117.90
▼
$227.30
- P/E ratio
- 112.95
- Target price
- $191.96
Talking about other stocks heading to the runway, Advanced Micro Devices could take the lead. NVIDIA Company NASDAQ: NVDA as the new leader of the artificial intelligence race through semiconductor manufacturing. This stock offers not only a price discount, but also huge upside potential according to Wall Street analysts.
Today, the consensus price target for Advanced Micro Devices shares is $191.96, implying net upside potential of as much as 60% from today’s prices. This setup would provide investors with a much better outlook than NVIDIA’s consensus price target of $164.1 per share, which suggests only 20% upside.
The 3x upside potential that is part of NVIDIA’s relative price action has recently attracted some institutional investors to Advanced Micro Devices stock. The company has received up to $19 billion in funding from institutional investors over the past 12 months, but the recent surge in buying may be more significant for investors.
State Street officials decided to increase their holdings in Advanced Micro Devices by 2.3% as of November 2024, bringing their net position today to a high of $11.5 billion, or 4.3% ownership in the company.
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