Year by year, Wall Street sees Tesla as less valuable. ARK Invest’s Cathie Wood sees things differently.
ARK Invest’s Cathie Wood sees Tesla shares reaching $2,600 by 2029, driven by self-driving vehicles.
On Wednesday, Wood’s ARK released its updated Tesla valuation. The new price target is up to $2,600 by 2029. That would value Tesla at more than $8 trillion and leave it trading for about 27 times ARK’s projected 2029 free cash flow of about $300 billion.
Those are “wow” numbers that represent a whopping 15-fold increase over the coming five years, which works out to an average annual return of about 72%.
It’s a lot, but Tesla stock has put up massive gains in the past. Coming into Wednesday trading, Tesla stock has grown roughly 12-fold over the past five years, which works out to an average annual return of almost 65%.
No one should be too surprised by the increase. Wood’s target prices tend to go up—a lot. ARK’s 2023 target price was $2,000 a share by 2027. That was up from $1,533 in 2022 and $1,000 in 2021. (The older targets are adjusted for Tesla stock splits.) The $2,000 target was 2026. The $1,000 target was for 2025.
Target prices typically have some sort of embedded date in them. Wall Street price targets often represent where analysts see shares going over the coming 12 months.
Wall Street’s Tesla price targets aren’t going in the same direction as Wood’s. The average analyst price target aggregated by FactSet is about $183 a share, down about $10 from a year ago.
More competition, higher interest rates, and slowing EV demand growth are all reasons Wall Street feels more cautious.
None of that seems to bother Wood. The vast majority of her value is derived from self-driving cars, which Tesla plans to offer but hasn’t created yet.
“Our confidence in Tesla’s ability to launch a robotaxi network within the next five years has increased considerably,” reads part of the report. ARK cites the coming August 8 robotaxi event, the recent free full self-driving trial, and Tesla selling FSD in China for their increased confidence. Tesla’s “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.”
Wood’s target without achieving self-driving cars is $350 a share. That price in 2029 would earn investors about 15% a year on average. ARK calls that outcome “unlikely.”
By 2029, ARK projects EV sales of 5.8 million units. The car business is expected to produce an operating margin of about 30%. (That’s about four times the industry average.) The robotaxi 2029 Ebitda is projected to be about $241 billion.
They haven’t included any benefit from Tesla’s humanoid robot called Optimus.
Tesla stock got a bump from Wood’s analysis. Shares were down to start the day and jumped about $2 a share after the ARK report was released. The stock closed up 3.9% at $177.29 while the S&P 500 and Nasdaq Composite rose 0.9% and 1.5%, respectively.
Slower-than-expected inflation data released early Wednesday helped the market rise in early trading.