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ARK Invest Shows Tesla’s Path to $15K Bull Case and a $22k Golden Goose Scenario

by Claribelle Deveza February 01, 2020

Tesla-ARK-Invest-2020-Report

ARK Invest recently released its thoughts on Tesla's potential trajectory for the next five years in a report penned by analysts Tasha Keeney, Sam Korus, and Brett Winton. ARK Invest's expected value per share for TSLA is $7,000 by 2024, based on bear and bull estimates within the same timespan.

ARK's report on Tesla's direction in the next five years was very insightful. It showcased almost every probable scenario that could play out by 2024, including what would happen if the company succeeded in its main projects today. 

ARK Invest's $7,000 price target for 2024 may seem incredibly ambitious for some, but compared to the firm's average bull case of $15,000 per share, the estimate is quite reasonable. Plus, ARK's estimation is based on the thorough research of Keeney, Korus, and Winton. Their report suggested three key variables that could significantly affect Tesla's multi-year forecast, namely Gross Margins, Capital Efficiency, and Autonomous Capability.

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Credit: ARK Invest

With Gross Margins, ARK observed the cost of each car Tesla produced, the selling price of each vehicle, and where it fell in line with Wright's Law. In terms of Capital Efficiency, ARK looked into how Tesla handled costs while trying to increase its production capacity. Lastly, with the company's pursuit of autonomous driving, ARK calculated the probability of Tesla successfully launching its Robotaxi fleet as a mainstream consumer service. 

ARK analysts examined ten different scenarios for Tesla within the next five years, including the worse case: TSLA going bankrupt. The best-case scenario—labeled the Golden Goose—for ARK was Tesla succeeding in lowering costs, building factories efficiently, and launching its autonomous network. 

With Gross Margins, Capital Efficiency, and Autonomous Capability in mind, ARK analysts predicted ten different outcomes for Tesla in 2024. While ARK remained reasonable with its price estimate of $7,000 per share, its price target for Tesla's best-case scenario was higher than the average bull case of $15,000 right now. According to ARK, Tesla's price target could be $22,000 by 2024 if it's able to catch the Golden Goose.

As it stands, Tesla seems to be in an excellent position to accomplish at least two out of three of its goals to get that Golden Goose. As a recap, the EV Maker needs to achieve its three goals to reach that $22,000 price target, seen below. 

  • Lower Costs
  • Build Factories Efficiently
  • Launch Autonomous Network

Giga Shanghai was a good beginning for Tesla's venture into building factories efficiently. Phase one was built in 10 months and was operational within one year. Based on the latest earnings call, Tesla's Shanghai Factory also helped the company lower costs. The company can quickly adopt this system to its succeeding factories as well, such as Giga Berlin in Germany, which will be starting its operations with the production of the Model Y crossover. 

Whether the company's cost-efficiency applies to the Fremont Factory is yet to be known. However, Tesla's expenditures on transporting the Standard Range Plus Model 3 to China has undoubtedly decreased. If Tesla can build factories in other parts of the world, like Giga Shanghai, it could save both time and money in the future—and that is only one way for the EV automaker to lower costs. 

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Credit: ARK Invest

As for Tesla's autonomous network, it hinges on the release of the company's feature-complete FSD. At the latest earnings call this January 29, Elon Musk said a feature-complete FSD might be ready "in a few months." He clarified that a feature-complete FSD only meant the car could take someone from home to work. If this is the case, Tesla's autonomous fleet may be the one goal that keeps it from that Gold Goose scenario.

Without Autonomous Capability, ARK's predicted price target for Tesla in 2024 is $3,400. That being said, Tesla's focus on autonomy, as hinted at by its new recruitment page for Autopilot AI, shows that the company is now more serious than ever to achieve true full self-driving technologies. 

Featured Image Credit: ARK Invest and Tesla

Follow me on Twitter: @PurplePanda88




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