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ARK Invest’s Cathie Wood predicted Tesla (TSLA) stock’s breakout over a year ago. Tesla reached a record-high once again on Tuesday when it reached up to US1,429.50 per share and closed at US$1,389.86, up 1.33% from the previous close. TSLA may continue its meteoric rise throughout the week, barring any unforeseen adverse circumstances.
Wood explained why ARK Invest thought Tesla stock would breakout in a CNBC interview last year. Steven Mark Ryan from Solving The Money Problem dissected Cathie Wood’s interview with CNBC in April 2019 in a recent video. He pointed out that Tesla stock was in the US$200+ range back when Wood did the interview and has since quintupled—5 times—in value a little over a year later.
In April 2019, most analysts were skeptical about TSLA. In striking contrast to TSLA skeptics was ARK Invest with its US$4,000 price target. In her 2019 CNBC interview, Cathie Wood explained why ARK Invest held its conviction for Tesla to one of her interviewers who had pointed out that TSLA stock had done nothing for five years.
“You as a trader and investors, but as a trader also understand that when you build a base like that, one of two things is going to happen. It’s either going to break down and that’s what a lot of the bears have been betting on, and they’ve been using every—throwing everything at it--or its going to break out. And the longer the base—you say five years—the longer the base…the bigger the breakout,” she said.
Steven elaborated that Cathie Wood was able to confidently predict Tesla’s breakout because she understands disruptive innovation and technology. “The truth is most of the broader finance media, most of the analysts on Wall Street etc. just don’t get this new world—disruptive technology, exponential growth, cost curves—they just don’t get it,” said the host of Solving the Money Problem.
Steven has a point. Analysts are still having trouble figuring out whether TSLA should be considered a tech stock or auto stock. Different analysts raise or drop price targets for different reasons. For example, Jeffries raised its price target for TSLA because it saw potential in the company’s energy division. Meanwhile, Adam Jonas from Morgan Stanely raised TSLA’s price target to US$740 recently because of its “resilience” in the auto market.
ARK Invest doesn’t see TSLA as just an auto company, or an energy company, or an innovative tech firm. ARK sees the sum of all Tesla’s parts and takes that into consideration when placing a price target for it.
“We have set our research teams—We’ve broken them out not by sectors but by innovation platform. So we have robotics, autonomous vehicles or robots, energy storage—they will be electric—artificial intelligence—they will be powered by artificial intelligence—transportation as a service,” Wood said more than a year ago.
“We have four analysts collaborating on this. I don’t think research departments out there are set up to analyze this stock. There is an amazing inefficiency, amazing inefficiency in this stock. It is our highest conviction idea for a reason.”
Many analysts have raised their price target for Tesla over the last couple of weeks, especially after Tesla’s production and deliveries report was released. Analysts seem to be reacting to current market trends when it comes to TSLA, while ARK Invest seems to have an overarching view of Tesla and its future.
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Ma. Claribelle Deveza holds zero share of Tesla, Inc., and currently (at the time of this article's publishing) holds zero options or securities in Tesla Inc. and/or its affiliates.