Ark Invest CEO and founder Cathie Wood may be best known for her 2018 price prediction on Tesla Inc TSLA shares. The price prediction was heavily scrutinized but came true years later and helped boost the profile of Wood and the price of many Ark Invest ETFs.
Wood and Ark are back with an updated Tesla price prediction that revolves heavily on the company's autonomous vehicle ambitions.
What Happened: In 2023, Ark Invest set a price target of $2,000 for Tesla for 2027. Then on Wednesday, the investment management firm announced a new price target of $2,600 for 2029.
"ARK estimates that nearly 90% of Tesla's enterprise value and earnings will be attributed to the robotaxi business in 2029," the new open-source model reads.
Ark lists a bear case price target of $2,000 and a bull case price target of $3,100 in the latest forecast. Ark also lists a price target of $350 for Tesla if it eliminates the robotaxi network from the model.
The new price target forecast model breaks down Tesla's 2029 revenue as being 63% from robotaxis and 26% from electric vehicles, with the rest coming from items like insurance and energy storage. The model predicts 2029 revenue of $1.2 trillion for Tesla.
The model shows $440 billion in EBITDA for Tesla in 2029 with 86% of EBITDA coming from the robotaxis and 10% coming from electric vehicles.
Ark predicts that Tesla will sell 5.8 million electric vehicles in 2029 with its bear case and 14.4 million units in its bull case.
The forecast relies heavily on robotaxis being launched by Tesla and Ark said it believes this will happen in the next two years. Ark predicts that Tesla will own and operate its vehicle network, retaining revenue per mile for the first three years.
In later years, Ark sees Tesla using third-party companies to own the vehicle fleets, with Tesla paid revenue per mile.
"Telsa plans to unveil its dedicated robotaxi vehicle in August 2024. While Tesla could transform its current fleet into robotaxis, we believe a custom-built CyberCab reflects increased confidence that its autonomy software will allow Tesla to scale the robotaxi business."
The new price target projection from Ark Invest does not include any impact from the Tesla Semi, Tesla Supercharging network, FSD licensing or AI-As-A-Service.
"Our confidence in Tesla's ability to launch a robotaxi network within the next five years has increased considerably. As a result, its business model should transform from one-off vehicle sales to a recurring revenue base as every car becomes an AI-powered cash flow generation machine."
Related Link: EXCLUSIVE: Cathie Wood Tells Benzinga Why Tesla Should Trade As A Tech Stock
Why It's Important: In February 2018, Wood issued a bullish bet on Tesla, calling for shares to hit $4,000. The price target was ahead of other analysts and was widely disregarded as being too bullish.
Three years later, Tesla shares hit the price target adjusted for a five-to-one split in August 2020.
The latest price target is likely the highest out there and would make Tesla the most valuable company in the world in the coming years. The bear case would take Tesla's market capitalization to $7 trillion, and the bull case would take Tesla's market capitalization to $10.9 trillion.
The world's most valuable companies are currently Apple Inc AAPL and Microsoft Corporation MSFT valued at $3.3 trillion and $3.2 trillion respectively. Under then new price target model, Ark believes that Tesla will be worth as much as Apple and Microsoft combined by 2029.
Tesla has been a top holding for Wood's Ark ETFs and has helped boost the performance of the funds when Tesla shares are performing well.
Here is a look at the current Tesla holdings by Ark Invest:
- Ark Innovation ETF ARKK: $694.7 million, largest holding, 11.1% of fund
- Ark Next Generation ETF ARKW: $116.4 million, fourth-largest holding, 7.9% of fund
- Ark Autonomous Technology & Robotics ETF ARKQ: $86.9 million, second-largest holding, 10.8% of fund
TSLA Price Action: Tesla shares trade at $176.98 at the time of writing, versus a 52-week trading range of $138.80 to $299.29.
Image created with a photo from Ark Invest and an image generated using artificial intelligence via Midjourney.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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