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If Tesla Stock Hits This Price, Cathie Wood Could Sell Her Position

September 24, 2021 3:10 pm
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If Tesla Stock Hits This Price, Cathie Wood Could Sell Her Position

Longtime Tesla Inc (NASDAQ:TSLA) bull Cathie Wood successfully predicted the rise of the electric vehicle leader’s share price when many weren’t as bullish on the company.

The Ark Invest CEO recently admitted to a target price that would see her trim the position sizably.

What Happened: Earlier this year, Wood told Benzinga on an episode of “The Raz Report” that Ark would announce a new price target for Tesla shares.

Shortly after the interview with Benzinga CEO Jason Raznick, Ark announced a price target of $3,000 for Tesla shares.

That $3,000 price target for the year 2025 could be a topping event for Ark’s investment in Tesla.

“If nothing were to change in our outlook and we got to $3,000 next year, my guess is that we would be peeling out of it,” Wood said at the Morningstar Investment Conference earlier this week.

Ark uses a Montel Carlo analysis to build its price target, which is based on a series of simulations to determine the probability of different outcomes with random variables.

The price target was based on 34 inputs, and over 40,000 possible simulations were used to create the new price target.

The price target takes into account the building of more gigafactories and adding car insurance. The impact of the price of Bitcoin (CRYPTO: BTC), which is held on the Tesla balance sheet, was not part of the valuation calculations. Tesla’s energy storage and solar business were also not included in the pricing model.

Related Link: With Tesla Over $800, Ark's Catherine Wood Proves Doubters Wrong On Huge Bullish Call From 2018 

Why It’s Important: Tesla is the largest holding in the Ark Innovation ETF (NYSE:ARKK), representing 10.1% of assets with over 2.9 million shares and almost $2.2 billion in value.

Tesla is also the largest holding of the Ark Next Generation ETF (NYSE:ARKW) representing 10.2% of assets, with over 745,000 shares representing over $560 million in value.

Wood has been trimming the stake in Tesla shares recently both on a share basis and also as a percentage of holdings. Earlier this year, Tesla represented 10.5% of assets in both funds.

Tesla is the largest holding in both ETFs by a considerable margin. The next closest assets are Teladoc Health (NYSE:TDOC) in ARKK and Twitter Inc (NYSE:TWTR) in ARKW at 5.7% and 5.6%, respectively.

Cutting the stake in Tesla significantly would greatly change the structure of the Ark ETFs.

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