Chris Curl,
Editor
June 20, 2024
Wall Street has become increasingly cautious about Tesla's (NASDAQ: TSLA) valuation.
And, to be fair, there are many reasons for their loss of faith.
Elon’s erratic social media behavior combined with Tesla’s recent shortfalls haven’t increased confidence in the direction of the company among those in mainstream finance.
However, Cathie Wood of ARK Invest has a different outlook.
She said back in April when Tesla stock was cratering, “now is not the time to run for the hills.”
This is when my colleague John Carl and I were telling our Digital Dispatch readers to buy.
Last week, ARK updated its Tesla price target, to…
Get ready for it…
$2,600 by 2029.
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This target values Tesla at over $8 trillion, trading at roughly 27 times ARK's estimated 2029 free cash flow of $300 billion.
These ambitious figures represent a 15-fold increase over the next five years, translating to an average annual return of about 72%.
Although these numbers are staggering, Tesla stock has a history of substantial gains, growing almost 12-fold in the past five years with an average annual return of nearly 65%. Such significant increases are a recurring theme in Wood’s forecasts.
ARK's 2023 target was $2,000 a share by 2027, an increase from previous targets of $1,533 in 2022 and $1,000 in 2021. These targets account for Tesla stock splits and generally include an embedded date.
In stark contrast, Wall Street's average analyst price target for Tesla stands at about $183 a share, down around $10 from a year ago.
Factors like increased competition, higher interest rates, and slowing electric vehicle demand contribute to Wall Street's more conservative stance.
However, Wood remains unfazed, deriving most of Tesla's value from self-driving cars, which the company has yet to produce. ARK's confidence in Tesla's forthcoming robotaxi network is growing, citing recent developments such as the August 8 robotaxi event, a free full self-driving trial, and sales of FSD in China.
"We think that the robotaxi opportunity globally will deliver $8 [trillion] to $10 trillion in revenue by 2030 and is one of the most important investment opportunities of our lifetimes." said Cathie Wood about Tesla.
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Wood believes Tesla’s business model will shift from one-off vehicle sales to a recurring revenue base, with each car becoming an AI-powered cash flow generator.
Without achieving self-driving capabilities, ARK's target is $350 a share by 2029, offering an average annual return of about 15%. ARK considers this outcome “unlikely,” projecting EV sales of 5.8 million units with a 30% operating margin by 2029, and a robotaxi EBITDA of $241 billion.
Tesla shares rose 3.9% to $177.29 after ARK’s analysis, even as broader markets also saw gains.
This analysis doesn’t account for additional technologies Tesla is developing, which Elon Musk recently claimed could add at least $20 trillion to its market cap. I’ve been writing for months about how this technology is the biggest story in tech.
And while I think these projections are overly optimistic, if Tesla manages to reach even a fraction of these milestones, investors who get in now will profit massively.
This is why we hold Tesla in the Digital Dispatch portfolio.
Find out what we’re buying next!
Keep coming back,
Chris Curl
Editor, Daily Profit Cycle