Longtime Tesla (NASDAQ: TSLA) investor Ark Invest has a strong belief in the manufacturer. Cathie Wood remains optimistic about Tesla by reiterating the manufacturer's base case of $3,000 per share in a recent interview.
Founder, CEO and CIO of Ark Invest Cathie Wood said Friday in an interview with Yahoo Finance Live that its Tesla base case is $3,000 per share. "Our estimate for Tesla's success has gone up. The main reason for that is their market share. Instead of going down from year-end 2017 to today, it has actually gone up fairly dramatically," Wood explained.
In the spring, Ark Invest updated its price target for Tesla to $3,000 per share by 2025. ARK's bear and bull case suggest that Tesla could be worth roughly $1,500 and $4,000 per share, respectively. Of note, the firm warned that it does not factor in Tesla's utility energy storage nor solar business into its models.
Key updates to ARK's model:
- The firm pushed its forecast price target forward one year to 2025.
- The firm refined its estimates for Tesla's capital efficiency.
- The firm added Tesla's insurance business to its model.
- The firm added assumptions for a human-driven ride-hail service.
- The firm increased the probability of Tesla achieving fully autonomous driving within five years.
Vehicles: ARK projects Tesla's sales of 5 to 10 million vehicles in 2025.
Insurance: ARK estimates that Tesla could achieve better than average margins on insurance thanks to the highly detailed driving data it collects from customer vehicles. If the company was able to sell 40% of vehicles with its own insurance offering by 2025, Tesla's insurance revenues could approach $23 billion annually in ARK's bear case. In its bull case, ARK estimates that, as robotaxis ramp, Tesla's insurance revenues will be incorporated into a platform fee. Insurance boosts the price target by roughly $60 in 2025.
Human-Driven Ride-Hail: ARK's bear case now includes Tesla's opportunity to launch a human-driven ride-hail service. In its bear case example, ride-hail could add an additional $20 billion to Tesla's operating profit by 2025, increasing the firm's price target by about $500.
Fully Autonomous Ride-Hail: ARK assumes that Tesla has a 50% chance of delivering fully autonomous driving by 2025. If 60% of its vehicles equipped with Autopilot were to serve as robotaxis, Tesla could generate an additional $160 billion in EBITDA in 2025.
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Eva Fox joined Tesmanian in 2019 to cover breaking news as an automotive journalist. The main topics that she covers are clean energy and electric vehicles. As a journalist, Eva is specialized in Tesla and topics related to the work and development of the company.