One of the biggest believers in the growth of electric vehicle leader Tesla Inc TSLA over the years has been Ark Invest CEO Cathie Wood. In 2018, Wood called out a huge future price target for Tesla that was laughed at — but the stock reached the level earlier than she said.
Here’s what Wood thinks about Tesla’s future valuation.
What Happened: In April, Ark Invest shared an updated price target of $2,000 for Tesla shares.
In a recent interview on "The Raz Report" with Benzinga CEO Jason Raznick, Wood stood behind her $2,000 price target and may have hinted at a future increase.
“Our price target for 2027 is $2,000, that’s what we’re in print on,” Wood said. “Our confidence in autonomous has gone up, so you can conclude what you want with that.”
Tesla's technology and FSD have improved, and Ark is impressed with the software upgrades it has seen, she said.
The Ark Invest CEO answered questions on callouts from investors asking why the company’s ETFs have sold Tesla shares despite being so bullish for the future.
Ark is always looking for times to take profits and move funds to other companies, Wood said. The CEO mentioned eVTOL company Archer Aviation ACHR as an example.
Ark expects a higher compounded annual growth rate from Archer than Tesla, but the stock is more speculative, she said.
Ark is able to source liquidity from onestock that has a good run and source it to another, Wood said.
“We’re very opportunistic.”
Ark will take profits on a stock if it has gone up over a short period of time and the profits can be allocated to another high-conviction trade idea that might have seen shares suffer a short-term pullback, she told Raznick.
Related Link: Exclusive: Is Nvidia Overvalued? Cathie Wood Says Every Stock Could Become An AI Stock
Why It’s Important: Wood is one of the most widely followed investors of the last five years. Some of the notoriety could be attributed to Wood’s famous call for Tesla shares to hit $4,000 back in 2018.
The call came at a time when Tesla shares were trading around $350 and the highest price target from analysts was $500.
“If we’re right, this stock in our models is going to $4,000. If we’re wrong and all they do is electric, our bear case is $600,” Wood said in 2018.
Three years later, Tesla shares hit Wood’s $4,000 price target when adjusted for a stock split.
Over the last several years, Ark Invest has shared several price targets for Tesla shares, factoring in items like full self-driving and robotaxis. A model previously laid out a price target of $500 by 2026.
The new price targets from April call for a base of $2,000 in 2027 with a bear case of $1,400 and a bull case of $2,500.
Wood told Raznick that analysts and investors may be getting part of the Tesla trade wrong if they’re valuing the company only as an automotive stock.
“Tesla, because of its positioning with AI, it is the only auto company or tech company that has designed its own chip for autonomous driving,” Wood said.
Wood compared Apple Inc AAPL to Tesla and its decision to make its own chip.
“It has taken a leaf from Apple’s book. Apple redefined the cell phone market by designing a chip that turned the cell phone into a computer.”
Tesla having its own chips and pushing into autonomous vehicles is important for the company’s future valuation, she said.
“This is not an auto play. This is an autonomous taxi platform play with software as-a-service like margins,” Wood said.
Tesla is the largest holding in both the Ark Innovation ETF ARKK and Ark Autonomous Technology & Robotics ETF ARRQ, representing 10.9% and 13.6% of assets, respectively. Tesla is the fourth-largest holding in the Ark Next Generation Internet ETFARKW, representing 6.6% of assets.
Read Next: Is Cathie Wood The Next Warren Buffett? Apple, Tesla Define Their Investment Strategies
Photo courtesy of Ark Invest.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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