Tesla (TSLA) stock is down more than 30% so far in 2024, but Ark Invest CEO Cathie Wood thinks "now is not the time to run for the hills." In fact, Ark has been buying the stock and thinks it could rise to $2,000 per share in the next five years, representing an increase of more than 1,000% from today's levels.
"Autos, in the future, will be electric," Wood said in a recent interview with CNBC. "We believe in five years, 75% to 85% of all sales will be electric."
And Tesla is not just an auto company, Wood told CNBC. It epitomizes three technologies – robotics, energy storage and artificial intelligence.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
When CNBC asked what Tesla would be worth in five years, Wood confidently said $2,000 per share.
The $2,000 per share figure is not new, either. In April 2023, Ark Invest published its valuation model for Tesla with the same price target and the expectation of reaching it by 2027. It also revealed a "bull case" target of $2,500 per share, which had a 25% probability, and a "bear case" target of $1,400 per share, also with a 25% probability.
Robotaxis are key to Tesla stock's growth
The key driver of Ark's investment thesis is Tesla's prospective robotaxi business, which it thinks could represent 44% of the $1.02 trillion in revenue, 64% of the $354 billion in earnings before interest, taxes, depreciation and amortization (EBITDA) and 67% of the $6.1 trillion enterprise value it expects Tesla to reach in 2027.
Ark's price targets rely heavily on the anticipated launch of the robotaxi business, "with late 2024 as the weighted average of all cases," it said.
"With a robotaxi platform, Tesla should be able to generate earnings from both the vehicle sale and a recurring ride-hail revenue stream, which ARK believes could generate software-like margins," Ark said in its valuation model. "As Elon Musk has phrased it, autonomous ride-hail ‘probably will be the biggest asset value increase in history.'"
If the robotaxi business does not launch in the near term, Ark may have to revise its target date for reaching the $2,000 per share price target.
As a point of comparison, the average target price of the 47 analysts covering Tesla stock that are tracked by S&P Global Market Intelligence is $196.64.
Related content
-
The ‘First Year of Retirement’ RuleThe 'first year of retirement' rule says the 12 months after you leave work set the tone for your entire later life — so it's vital to approach them mindfully.
-
Tech Stocks Drag This Growth Fund DownA rough stretch for mega-cap tech and tech-adjacent names has put pressure on this Mairs & Powers mutual fund.
-
Tech Stocks Drag This Growth Fund Down
A rough stretch for mega-cap tech and tech-adjacent names has put pressure on this Mairs & Powers mutual fund.
-
Timing Is Everything for Roth Conversions: An Expert's Guide to the Right StrategyUnderstanding the nuances of Roth conversions can help you avoid forking over more money in taxes than you need to.
-
Are You Ready for the Emotional Side of Retirement?Financial adviser warns that life after work is coming, so start preparing … mentally, as well as financially. If you're nervous, take heart. Some simple strategies could ease the way.
-
Stock Market Today: Dow Dives 769 Points on Iran-Israel ConflictLosses accelerated in afternoon trading amid reports Iran retaliated against Israel.
-
Four Ways to Help Prevent a Market Downturn From Scrambling Your Nest EggYou may not be able to avoid a market decline when you're newly retired and starting to rely on your nest egg for income, but you can plan for that risk.
-
Is Your Home Disaster-Ready? An Insurance Expert's Guide to Preparing for Storms and FiresHomeowners can take these steps to protect their properties from hurricanes, tornadoes, wildfires and hail, while also potentially reducing their insurance costs.
-
Stock Market Today: Stocks Rise as Treasury Yields DropA round of not-too-terrible economic data helped boost the bond market Thursday.
-
A Financial Adviser's Defense of Annuities: They're Just MisunderstoodAnnuities can offer retirement income stability and security against market volatility, though some do have drawbacks. The key is to understand their features before buying.
