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ARK Investment Management’s chief executive and chief investment officer, Cathie Wood
Bloomberg/Alex Flynn
Founder and CEO of ARK Invest
Tesla
bull Cathie Wood has set a new target price for Tesla. It’s a monster. Tesla is expected to exceed $3,000 per share in 2025, according to Wood. Based on Tesla’s (ticker: TSLA) Friday closing price of $654.87 a share, Wood expects to make roughly 50% a year on average between now and 2025.
Based on outstanding shares, including management stock options and other prospective shares, Tesla would be worth almost $3.6 trillion.
Apple
In comparison, (AAPL) is currently valued at almost $2 trillion. To maintain its position as the most valuable firm in the United States, Apple would have to gain nearly 30% per year on average.
In 2018, Wood established a target price of $800 per share. Tesla shares were trading at $70 at the time, so it was an aggressive aim. However, the stock rose over $800 in early 2021, giving investors a return of more than 100% every year on average since the beginning of 2018. It’s been a fantastic run. Higher potential for a self-driving taxi service appears to be a significant factor for the latest price target boost. According to ARK’s research study, “in our last value model, we believed Tesla had a 30% chance of delivering completely autonomous driving in the five years ended 2024.” “By 2025, ARK thinks that the probability will be 50%.” Tesla-operated robotaxis with autonomous driving may generate an additional $160 billion in Ebitda (earnings before interest, taxes, depreciation, and amortization) for the corporation. This past year, Tesla’s Ebitda was around $4.8 billion. For the foreseeable future, Tesla management plans to increase unit volume by 50% each year on average. Barron’s recently made an educated estimate as to what Wood’s new target price would be. Our estimate for a share was $2,300. It wasn’t a forecast based on historical data. Instead, Wood told Barron’s Jack Hough that she expected the stock to do significantly better than her 15% return threshold for stock purchases. We thought a 30 percent average annual return was significantly greater than 15 percent, but we were wrong. Tesla’s stock has just hit a snag. Interest rate hikes have harmed high-growth stocks such as Tesla more than others. For starters, increasing interest rates make financing growth more expensive. Second, the majority of high-growth enterprises’ cash flow is generated in the future. Greater rates make the prospect of future cash less appealing than the current higher income from bonds. The 10-year Treasury note yield just surpassed 1.7 percent, an increase of around 0.5 percent in recent weeks. Tesla’s stock is down approximately 7% year to date, far below comparable returns in the market.
S&P 500 Index
and
The Dow Jones Industrial Average is a stock market index that measures how well a
The stock is down approximately 27% from its January 52-week high. The 10-year Treasury note yielded around 1.1 percent at the time. Al Root can be reached at allen.root@dowjones.com.
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