Topline
Stock picker Cathie Wood’s Ark Invest bought Tesla’s dip in a big way on Thursday, boldly forecasting the electric vehicle company will surge to a more than $6 trillion valuation over the next four years on the same day its stock tanked 10%.
Cathie Wood speaks at a conference last year.
Key Facts
Wood’s firm disclosed it bought 219,810 shares of Tesla in its flagship Ark Innovation ETF and another 36,213 shares of Tesla in its Next Generation Internet ETF.
That’s a roughly $41.7 million buy-up, using Tesla’s $163 closing price Thursday, when the stock slid 9.8% and the company lost $51 billion in market value as investors reacted sharply to Tesla’s shrinking profit margins.
Staunch and longtime Tesla bulls, Wood and Ark also released their projections for the automaker’s future stock performance on Thursday, offering up quite the rosy picture.
Ark set a $2,000 base case scenario for Tesla’s share price in 2027, an 11-fold increase, setting its bearish forecast at a $1,400 share price and bullish at $2,500, eight-fold and 14-fold respective jumps.
At $2,000 per share, Tesla would have a market capitalization of $6.3 trillion, roughly the market cap of the world’s three most valuable companies—Apple, Microsoft and Saudi Aramco—combined.
Driving Ark’s lofty expectations for Tesla were its forecasts for the company’s robotaxi, or driverless ride hailing, segment, projecting $200 billion in 2027 revenue from the unit in a bearish scenario and $613 billion in a bullish case, a seemingly tall ask for a division that currently brings in no revenue.
Contra
A 2022 Fortune Business Insights report predicted the global robotaxi market would surge some 6,000% from $1.7 billion to $108 billion from 2021 to 2029, still far, far short of what Ark expects just Tesla to rake in by 2027 in the unit. No analyst has a price target for Tesla above $310, according to FactSet.
Key Background
Elon Musk seems to agree with Ark’s ambitions for Tesla, saying in an October earnings call he sees a “potential path” for Tesla’s market cap to exceed Apple and Saudi Aramco’s combined valuation. Ark owns about $850 million worth of Tesla, by far its largest position. Thanks partially to the ETF’s early investment in Tesla, Ark’s flagship fund surged nearly 800% between its 2014 launch and its 2021 peak, earning Wood mass recognition and a personal fortune that topped out at $400 million. But the fund has far underperformed the broader market over the last two years as its tech bets fell flat, down more than 75% since early 2021. Wood has a history of making bold proclamations regarding her favored disruptive investments, predicting last fall bitcoin would be worth $1 million per coin by the end of the decade (Bitcoin traded at about $28,000 Friday).
Crucial Quote
Today’s investors are “too fearful of innovation that is going on,” Wood told Forbes last October.
Further Reading
Tesla Loses Equivalent Of Ford’s Market Value In A Single Day (Forbes)
Cathie Wood Warns Against Extreme Fear Of Innovation Gripping The Market (Forbes)
Source: https://www.forbes.com/sites/dereksaul/2023/04/21/cathie-woods-ark-buys-42-million-in-tesla-predicts-1100-rise-for-the-slumping-stock/