Cathie Wood’s ARK Invest rose to fame thanks to high-conviction calls on one of the most polarizing names on the Street: Tesla (TSLA). And now, the firm is doubling down on its optimism around the EV maker with another bold price target for the shares: $2,000 by 2027.
Key to the company’s latest optimism about Tesla is the company’s as-yet-unlaunched robotaxi business underpinned by its self-driving technology. In the ARK bullish scenario, Tesla’s robotaxi business could generate $613 billion in revenue by 2027 and account for two-thirds of the company’s enterprise value.
In this bullish scenario, Tesla shares would reach $2,400 per share and the company’s market capitalization would approach $8 trillion.
Tesla shares closed the trading session on Monday at $162.55, giving the company a market capitalization of just over $500 billion. Over the past year, Tesla’s stock has roughly halved.
“In fact, we’ve modeled the opportunity on Robotaxis in autonomy, and if you look at the future of Tesla vehicles that are able to be robotaxi-enabled and get a recurring revenue stream on what we think will be software-as-a-service as margins, this it’s incredible potential for Tesla,” Tasha Keeney, an analyst at ARK, told Yahoo Finance Live on Monday. “It will definitely be the highest return on investment per battery produced, as we have discussed in our new report.”
Notably, Tesla does not yet have a revenue-generating robotaxi business.
As for timing, Keeney thinks it’s possible Tesla will introduce fully autonomous software by the end of the year, which CEO Elon Musk predicted in the company’s first-quarter earnings call, though he thinks mid-2024 is an expectation. more realistic.
According to the ARK model, the faster Tesla can release this software and capability, the better, as the financial reward for being first mover could be huge.
“We think the global robotic taxi market could be worth $9 to $10 trillion over the next decade,” Keeney said.
ARK’s latest round of optimism comes as Wall Street had a rather pessimistic view on Tesla’s first-quarter report, with the company’s price cuts hitting margins. Gross margins in the first quarter fell to 19.3%, down from 29.1% in the same period last year.
“They’re in a corner,” Ronald Judiosikow, an analyst at Guggenheim Securities, told Yahoo Finance Live after last Wednesday’s report. “They put out a lot of supplies that need to find a home. And the only tool they really have is to cut prices.”
In the first quarter, Tesla reported revenue of $23.3 billion, roughly in line with Wall Street expectations, while earnings per share came in at $0.85, a penny less than estimates.
“Musk & Co. cut prices to further stimulate consumer demand in a shaky macro amid growing EV competition globally in this EV arms race,” Wedbush analyst Dan Ives wrote. , in a note to clients last week. “No rose-colored glasses: Margins are now a touchy topic keeping Tesla investors awake.”
Keeney told Yahoo Finance that ARK sees Tesla’s price cuts as part of its efforts to gain global EV market share, a more important measure than profitability per car at this point in the market’s shift to vehicles. electrical.
“We think based on cost-efficiency for the price you’re paying for the car, they’re still way ahead of the competition,” Keeney said. “And I’d be pretty scared if I was a traditional automaker right now and I saw Tesla cut prices, I’ll tell you that, because not all of these platforms are profitable in other automakers yet.”
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