ARK Invest, the exchange-traded fund (ETF) run by Cathie Wood is famous for its bullish predictions about Tesla. Back in January 2020, ARK predicted Tesla’s stock will 10X to $460 per share by 2024 ($7000 before the 15-to-one stock split). The price target was the highest among all financial firms that followed Tesla.
At the time, most thought ARK’s prediction was laughable. However, at its highest closing price on November 5, 2021, Tesla stock was almost 9X its price since ARK released its report. Currently, Tesla stock has given up some of its gains and sits at 4X its January 2020 price.
And in April 2022, taking into consideration the run-up in Tesla’s stock price and the company releasing the beta version of its full self-driving software, ARK released a new Tesla prediction. In the new research released last year, ARK gave Tesla a 2026 price target of $1500 per share or a $5 trillion market cap.
This was ARK’s base case prediction for Tesla’s stock price however, the firm also gave a bull case of $1900 per share ($6.7 trillion market cap) and a bear case of $1000 per share ($3.3 trillion market cap).
In ARK’s both bearish and bullish scenarios, the firm predicts Tesla will launch an autonomous robotaxi service. However, the difference between the 2 scenarios is that in the bearish one, Tesla will launch the service closer to the 2026 date, and in the bullish scenario, Tesla will launch the service closer to 2022.
In the bearish scenario, ARK predicts Tesla will have a mix of human-driven ride-hailing service and autonomous robotaxis, fetching the EV maker $67 billion & $51 billion per year, respectively. ARK also predicts Tesla will grow the number of vehicles it sells at a compounded rate of 50% per year. This will mean a 2026 annual production capacity of 10 million vehicles.
All this coming true by 2026 will be amazing for Tesla however, ARK’s bullish prediction gets even better. In the firm’s bullish prediction, ARK believes Tesla will be able to produce 17 million vehicles a year by 2026. Of the 17 million vehicles, ARK expects 60% to go into the ride-hailing business.
In this bull scenario, ARK expects Tesla to generate $513 billion from vehicle sales and $486 billion from autonomous robotaxi revenue. ARK predicts a 34% gross margin for vehicle sales and an 80% gross margin for the autonomous robotaxi service. In this scenario, ARK predicts Tesla’s share price will rise to $1,900 per share or a $6.7 trillion market cap.
ARK’s bear and bull cases are tuned to the 25th and 75th percentile Monte Carlo distribution, respectively. And the firm has taken the 50th percentile as its base case. In ARK’s base-case analysis, the firm believes Tesla will have an autonomous robotaxi service and will sell between 10 and 17 million vehicles a year.
And if Tesla doesn’t achieve level 5 autonomy by 2026, in January of this year, ARK Invest researcher Tasha Keeney provided a new Tesla price target that eliminates robotaxi services altogether writing on Twitter “removing autonomous driving & any form of ride-hail, which we believe will drive >60% of Tesla's value over the next 5 years, our 2026 price target would become roughly $500/share (post-split) based on EVs alone, more than a 4X increase from current price.”
Removing autonomous driving & any form of ride-hail, which we believe will drive >60% of Tesla's value over the next 5 years, our 2026 price target would become roughly $500/share (post-split) based on EVs alone, more than a 4X increase from current price.https://t.co/SWx3ZlQKHT— Tasha Keeney (@TashaARK) January 6, 2023
ARK’s prediction for Tesla’s stock price is anything less than incredible. Nonetheless, Thursday evening it was disclosed that the firm has sold 139,000 Tesla shares which amount to $27 million. ARK sold 119,630 Tesla shares from its ARKK, or Innovation, ETF, and 20,012 shares from ARKW, or Next Generation Internet, fund.
This is concerning to some Tesla bulls, especially given that we are approaching the end of the first quarter and that there are fears that, the steep price cuts the EV maker instituted at the beginning of the quarter will negatively affect the firm’s profitability.
Having said that, for those thinking ARK is abandoning Tesla, the EV maker still remains the largest holding in the ARKK ETF, with 10.5 percent of the fund. Tesla is also the fourth-largest holding in the ARKW fund, accounting for 6.9 percent.
In addition, the recent sale of Tesla shares follows several months of buying from ARK throughout the year until the middle of March. However, if ARK’s offloading of Tesla shares continues we will be sure to keep you posted.
Until then make sure to follow our site torquenews.com/Tesla regularly for the latest updates.
So what do you think? Disappointed that ARK is selling Tesla shares? Also, what do you think of ARK’s 2026 Tesla price target of $1,500 per share? Let me know your thoughts in the comments below.
Image: Courtesy of Tesla
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Tinsae Aregay has been following Tesla and The evolution of the EV space on a daily basis for several years. He covers everything about Tesla from the cars to Elon Musk, the energy business, and autonomy. Follow Tinsae on Twitter at @TinsaeAregay for daily Tesla news.