Glen Kacher, the brain behind hedge fund Light Street Capital, leads his long/short equity firm to pay attention to the tech whizzes on Wall Street, opting to invest in the tech giants that know how to out-innovate the competition. For Kacher, this is no simple process, as he is a proponent of researching the ins and outs of business and financial proceedings to truly grasp where capital is headed. In Silicon Valley, Kacher cares a great deal about the change-makers and the disruptive heavyweights that are making more than just minor waves in the market through leading-edge ideas. In the first quarter of 2017, how did Kacher assess value in large-cap players like Tesla Inc (NASDAQ:TSLA), Apple Inc. (NASDAQ:AAPL), and Facebook Inc (NASDAQ:FB)? Which companies are on the brink of the next big industry evolution, and which ones have kept Light Street more at bay? Let’s explore:
What’s the Price for Steering Away from Tesla?
Light Street Capital reduced its stake in Tesla by 33,00 shares, cutting it 20% down to 132,000 shares worth $36,736. It’s a first quarter move financial analytics firm S3 Partners backs, determining the electric car giant has enough bears in doubt that the stock has become the most shorted stock in the U.S. stock market.
CEO Elon Musk tweeted that it “could be worse” in reaction to the title for most-shorted on the Street, saucily adding, “These guys want us to die so bad they can taste it.” Perhaps Musk has a reason to be cheeky. Tesla landed for the first time on the Fortune 500 list this week, earning a #383 ranking while one day later hitting a record high in trading price.
One can imagine some of these bears squirming in their seats, and Musk is enjoying every minute of it. Short interest rests at $10.4 billion currently, which makes sense for Kacher’s choice to backtrack in his latest quarterly play. Yet, how much of a loss did the short sellers incur as of last week? Investors had to shell out a total $442 million in market-to-market losses, which indicates back-to-back weeks that Tesla came up short for the bears. These losses have risen beyond $5 billion year-to-date, which presently leaves Musk with the last laugh.
Part of what was a win for the bulls boils down to the buzz from garnering an upgrade from Consumer Edge Research, following a price target lift from Schaffer’s research. New positive waves in the analyst world are stemming from high expectation for the forthcoming mass-market Model 3, which could make the luxurious Tesla brand an option for more electric car enthusiasts.
Nonetheless, investors will continue to be skeptics of the giant. Kacher’s firm is not the first and likewise will not be the last to play the odds against Musk’s brainchild. However, with shares hitting its most recent greatest peak yet, the tide might be rolling away from the short sellers for now.
Overall, it appears the Street is mixed on Tesla, as the majority survey the giant from the sidelines. TipRanks analytics show TSLA as a Hold. Out of 18 analysts polled by TipRanks in the last 3 months, 5 are bullish on Tesla stock, 7 remain sidelined, and 6 are bearish on the stock. With a loss potential of nearly 24%, the stock’s consensus target price stands at $272.50.
Time to Bite into Apple
Kacher decided to take a carpe diem mentality when sizing up Apple this past quarter, choosing to dive in with a holding of 190,000 shares worth $22,950,000. Perhaps CEO Tim Cook’s new eye on healthcare putting Apple Watch and the App Store in fresh light.
Rumor has the tech giant’s CEO is putting a glucose monitor to evaluation, checking to see how it keeps tabs on blood sugar, sending the details through to the AAPL watch, as Cook was seen with this blood sugar monitor while ambling along campus. The word on the Street has it that there is a secret team of 30 experts fast at work to create a non-invasive glucose monitor for the diabetes market.
No one knows when this vision could spring to life, but there is no question that this presents meaningful prospects are out there on the health and fitness table for the company. Added bonus? Diabetics would not have to draw blood multiple times per day anymore, nor would they need to prod open their skin with a probe, making the possibility of this glucose monitor more compelling. Lessening discomfort is always a win, but Apple would achieve this all while rendering dietary habits trackable live, in real-time. This is something rivals like Alphabet have yet to be able to bring to fruition.
Meanwhile, at the annual Apple Worldwide Developers Conference on Monday, the giant introduced GymKit, further proof of its strides to take its hardware-meets-software strengths and let them play out in the healthcare-verse. The new-and-improved watchOS will let athletic Apple users and gym enthusiasts alike to sync the Apple Watch to equipment at the gym, leading to a detailed workout play-by-play.
With technological flourishes upgrading the ability to track health and fitness in the process, it is no wonder TipRanks analytics demonstrate AAPL as a Strong Buy. Based on 32 analysts polled by TipRanks in the last 3 months, 26 rate a Buy on Apple stock and 6 maintain a Hold. The 12-month average price target stands at $164.41, marking a nearly 10% upside from where the stock is currently trading.
Facebook Is a Top Pick
Kacher is getting more bullish on Facebook stock, guiding Light Street Capital to boost its position in the social media titan by 230,000 shares to 525,000 shares worth $74,576,000. This titan towers at #3 out of all of the hedge fund’s holdings, making Facebook a top pick for the guru.
Founder and CEO Mark Zuckerberg’s team had warned of dipping ad growth, but Piper Jaffray aligns with Kacher’s confidence, rooting for this titan and its long-term earnings power. In fact, Piper Jaffray ventures as far as to guess the titan’s revenues could rise as much as three times over before 2022 hits, which means within less than five years, it is possible investors will not even remember ad growth concerns.
One key weapon in Facebook’s back pocket is its Instagram acquisition, which continues to pay off for the titan, offering further ad opportunities. Piper Jaffray projects revenues could escalate from $2 billion last year to a whopping $22 billion in 2021. Instagram user engagement has revealed almost quadruple user engagement for brands compared to Facebook, and the same applies for celebrities.
When glimpsing ahead into a technologically-dominated future, the one with the keys to the virtual reality market will be profitable indeed, with some guesstimating in a span of five years, this market could circle $150 billion. Facebook has responded by readying its Oculus Rift VR Headset, adding a social experience powered by virtual reality. It brings a personable relatability to bat while taking advantage of the VR cards. Zuckerberg intends to evolve with the changing times, eager to make communication more virtual for his users, and subsequently keeping Facebook relevant for years to come.
The Street squares off staunchly in the titan’s favor, TipRanks analytics exhibit FB as a Strong Buy. Out of 31 analysts polled by TipRanks in the last 3 months, 31 are bullish on Facebook stock while 2 remain sidelined. With a return potential of 15%, the stock’s consensus target price stands at $171.32.