Cathie Wood’s ARK Invest predicts Tesla stock will rise 1,345% over the next five years. Elon Musk says it’s ‘a huge challenge, but achievable’
Bill Gates once famously said that people tend to overestimate the amount of change that can happen in one year, but underestimate the amount of change that can happen in 10 years. It is an idea, known as Gates’ law, that Cathie Wood and ARK Invest need to be true if their high price of Tesla is to be a reality.
ARK analysts, led by Tasha Keeney, released a report detailing their latest forecast for Elon Musk’s EV giant on Wednesday. It argues that Tesla shares will rise nearly 1,350% to $2,600 by 2029—and robotaxis is key to the theory of optimism. “ARK estimates that nearly 90 percent of Tesla’s business value and revenue will be accounted for by the robotics business by 2029,” Keeney and his team wrote.
Of course, Tesla isn’t in the robotics business yet. But ARK says everything is guaranteed to be released soon. “We believe that Tesla will launch a robot service in the next two years, and that the possibility that Tesla fails to launch a robot service within five years is de minimis,” Keeney and his team explained, noting that Tesla said it would unveil a robotaxi operating system and a prototype at an event in August 8.
But what if Tesla doesn’t expand its robotaxi network in time, due to difficulty getting regulatory approval or for any number of other reasons? However, ARK analysts are very few. They say Tesla may launch a “human-powered” ride-sharing business to compete with the likes of Uber, but that won’t drive up prices the same way a robot would. “Although unlikely, if we were to remove the possibility of a robotaxi network from our model, our target price would be ~$350,” Keeney and his team admitted on Wednesday.
That means Tesla’s shares could rise by 1,350% in the next five years—or a whopping 95%—and it all depends on the success of the robotics business, at least according to Cathie Wood and ARK Invest. However, the ARK Invest team excludes this from its bearish stance, which foresees Tesla shares rising to $2,000 by 2029.
ARK’s bullish outlook also includes a big increase in Tesla’s car production. Keeney and his team expect the EV giant to increase production by 45% each year through 2029. In the first quarter, Tesla’s vehicle production fell 1.7% from a year ago to 433,000 as EV demand slowed. But ARK says the rollout of the robotaxi business will lead to significant sales growth as robotaxi “fleet owners” start buying Tesla’s new EVs. “Robotaxis is likely to simplify manufacturing by simplifying vehicle designs and making more money through revenue-generating rides,” he added.
While ARK’s latest forecast for Tesla shares may seem overly optimistic, Cathie Wood and her team have a history of making unbiased calls, without consensus. In 2018, for example, Wood shocked Wall Street by predicting that Tesla shares would rise 1,200% to $4,000 by 2023. At the time, the EV giant was struggling to scale production of its Model 3, and Elon Musk noted in a conference call that Apple’s Tim Cook had even talked to him about buying the company.
But Tesla finally succeeded in that dark time, and Wood’s seemingly crazy prediction came true, Tesla’s shares hit $4,000 adjusted equivalent by January 2021. Now, Wood predicts another path of good form at Tesla, and noted the vision. it doesn’t even include any revenue from the potential rollout of Tesla’s Optimus robot, which could be huge.
“Our research suggests that general humanoid robots represent a ~$24 trillion global revenue opportunity, ~50% in manufacturing. If he decides to sell Optimus abroad, Tesla may capture a large part of this multi-billion dollar market,” said ARK analysts.
Tesla CEO Elon Musk also responded to ARK’s X prediction on Wednesday, calling it “very challenging, but achievable.”
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