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Posted on EVANNEX on April 28, 2023, by Peter McGuthrie
Cathie Wood, CEO of investment management firm ARK Invest, has long been bullish on Tesla. Wood recently explained why she thinks Tesla’s stock could hit at least $2,000 by 2027, representing “one of the most important investment opportunities of our lifetimes.”
Above: A Tesla Model Y (Image: Casey Murphy / EVANNEX).
Wood expects Tesla’s Full Self-Driving (FSD) beta to someday support a fleet of robotaxis, noting that the autonomy business would be a key driver of her $2,000 expected value estimate on the stock. The news, as shared by ARK Invest and reported by CNBC, represents an increase from Wood’s previous target of $1,500 by 2026, predicted last June.
In the recent note, Wood and Ark Invest predicted that Tesla’s robotaxis could bring in as much as $8 or $10 trillion of revenue by 2030. Tesla has remained one of Ark’s largest holdings for the flagship Ark Innovation ETF (ARKK), with a total 9.4 percent weighting. Along with Ark’s expected value of $2,000 per share, Wood also shared a bull case price target of $2,500, as well as a bear case price target of $1,400.
The firm predicts that Tesla’s robotaxi business will contribute 67 percent of its expected enterprise value, and 64 percent of its expected EBITDA in 2027. Additionally, it expects that Tesla’s EVs will contribute 47 percent of revenues in the same year, albeit at “substantially lower margins than robotaxi revenue.”
With Tesla’s current and future generations of vehicles all having FSD capabilities, the company is effectively scaling the potential for robotaxis with each car it sells. Even as the system develops and improves through increased FSD beta testers, the company will be deploying a large vehicle fleet, someday capable of autonomy.
Above: Ark Invest CEO Cathie Wood has a $2,000 price target for Tesla in 2027 (Video: CNBC / YouTube).
It’s this prediction that makes Wood and Ark so bullish on Tesla and the potential for a robotaxi business, a possibility CEO Elon Musk first mentioned in 2016. Wood also emphasized the need for Tesla to scale autonomy in recent statements about a potential robotaxi business.
“We want Tesla to scale its unit,” Wood said. “Each one of them now presents the potential for robotaxi and robotaxi fleet. We think that it is very smart to maximize units.”
Musk has also highlighted Tesla’s future potential in profiting off of autonomy in the past. At Tesla’s recent earnings call, he also pointed to a “higher volume-lower margin” strategy, not unlike Wood’s point of maximizing units on the road.
“We’ve taken a view that pushing for higher volumes and a larger fleet is the right choice here versus a lower volume and higher margin,” Musk said of recent price cuts.
It’s impossible to say with any certainty what may happen to Tesla’s stock. However, with autonomy development quickly gaining traction in the auto industry, it’s not long before it enters the market more significantly — and Wood certainly thinks it’s a worthwhile market to get a jump on.
Sources: ARK Invest / CNBC / YouTube
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