Ark Invest CEO Cathie Wood has helped launched several ETFs that bet on innovative companies, including betting on the future growth of Tesla Inc (NASDAQ:TSLA) in sectors like electric vehicles, clean energy, autonomous vehicles, robotics and AI.
In 2018, Wood placed a bullish call on Tesla that was far ahead of other analysts. In less than three years, Wood's price prediction came true and helped cement her legacy. Here's how investors fared who followed her trade.
Wood’s Famous Tesla Call
On Feb. 7, 2018, Ark Invest CEO Cathie Wood called for shares of Tesla to hit $4,000.
"If we're right, this stock in our models is going to $4,000," Wood said on CNBC. "If we're wrong, and all they do is electric, our bear case is $600."
The call from Wood seemed out there at the time, with the highest price target from analysts sitting at $500 and shares of the electric vehicle company trading at $346.
"The future is electric. The future is transportation-as-a-service, software-as-a-service. This is where Tesla is going."
Tesla shares underwent a five-for-one share split in August 2020, making the price target from Wood a split-adjusted $800 per share for Tesla.
In January 2021, Wood's prediction came true, with Tesla passing the $800 level.
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Investing $1,000 In Tesla
Wood's call for Tesla to hit $4,000 per share was out there and ahead of analysts at the time. Those investors who saw her bullish call and conviction as reasons to invest have been rewarded with the milestone achieved.
A $1,000 investment in Tesla on Feb. 7, 2018 could have purchased 2.89 shares of Tesla based on a high price of $346 that day.
The 2.89 shares would turn into 14.45 shares after the five-for-one stock split in 2020. A recent three-for-one stock split in August 2022 turned the 14.45 shares into 43.35 shares. The 43.35 shares would be worth $15,045.92 today, based on a price of $347.08 for Tesla at the time of writing.
The investment would be up 1,404.6% over the last seven and a half years, significantly outperforming the S&P 500 average annual gains of 12.6% over the same time period.
What’s Next For Tesla?
While Wood famously called for a $4,000 price target that many laughed at in 2018, she has a bullish outlook for the future that others are likely skeptical of once again.
Wood announced a $2,600 price target for Tesla in June 2024, raising the bar from a previous price target of $2,000 for the electric vehicle stock. Ark Invest has a bear case price target of $2,000 and a bull case of $3,100 for Tesla stock by the year 2029.
Tesla remains a significant investment for Ark Invest, with the stock being the top asset across the main Ark Invest funds, representing 8.4% of assets, according to Cathie’s Ark data.
Tesla is the number one holding in the following Ark Invest ETFs:
- Ark Innovation ETF (BATS:ARKK): $779.5 million in shares, 10.8% of assets
- Ark Next Generation ETF (BATS:ARKW): $193.9 million in shares, 8.3% of assets
- Ark Autonomous Technology & Robotics ETF (BATS:ARQ): $143.4 million in shares, 11.2% of assets
Wood has said in interviews that Tesla's robotaxis represent a software-as-a-service-like business model that will provide high operating margins for the company.
The new price target is based on several factors, with the majority of the price target coming from Tesla’s robotaxi ambitions.
“ARK estimates that nearly 90% of Tesla’s enterprise value and earnings will be attributed to the robotaxi business in 2029,” the open-source model reads.
Aside from the new price targets in the thousands of dollars, Ark also lists a price target of $350 for Tesla if it eliminates the robotaxi network from the model, stressing the importance of this future catalyst.
The new price target forecast model breaks down Tesla’s 2029 revenue as 63% from robotaxis and 26% from electric vehicles, with the rest coming from items such as insurance and energy storage.
Ark Invest estimates that Tesla could have revenue of $1.2 trillion in 2029 and EBITDA of $440 billion. The prediction assumes that Tesla will sell 5.8 million electric vehicles in 2029.
The new Ark Invest price target does not include any impact from the Tesla Semi, Tesla Supercharging network, FSD licensing or AI-As-A-Service. The price model includes minimal results from the Optimus bot.
Tesla CEO Elon Musk recently highlighted the potential value of the robotaxi business and Optimus bot as the catalysts that could make Tesla the most valuable company in the world, worth north of $30 trillion.
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This article was previously published by Benzinga and has been updated.
Image created using artificial intelligence via Midjourney.
