Cathy Wood’s Ark Invest is famous for being bullish about Tesla. Ark Invest has just released an update to their price target for Tesla in 2025 and it includes a bull case where Tesla ships 10 million cars, autonomous robotaxis and has a more than 25% chance of being worth more than 4 Trillion dollars.
Ark Invest’s updated forecast includes key updates to their model.
- We pushed our forecast price target forward one year to 2025.
- We refined our estimates for Tesla’s capital efficiency.
- We added Tesla’s insurance business to our model.
- We added assumptions for a human-driven ride-hail service.
- We increased the probability of Tesla achieving fully autonomous driving within five years.
Naturally with all good funds, they set out a bear and bull case, which even in the worst case has Tesla growing substantially to ship 5 million cars by 2025 and be worth almost 3x what they are now with a $1.5 Trillion market cap and share price.
To give you some perspective, Apple has a 2.01T market cap today and Amazon is at 1.55T.
|ARK’s Predicted Scenarios||2025 Price Target||Significance|
|Expected Value||$3,000||This projection is our base case for TSLA’s stock price in 2025 based on our Monte Carlo analysis.|
|Bear Case||$1,500||We believe that there is a 25% probability that Tesla could be worth $1,500 per share or less in 2025.|
|Bull Case||$4,000||We believe that there is a 25% probability that Tesla could be worth $4,000 per share or more in 2025.|
Ark breaks down their model with a number of key inputs.
While Elon has predicted around 50% annual growth rate, Ark clearly thinks Elon is sandbagging with predictions that could be somewhere between 65 and 90%.
|Maximum Annual Production Increase**||65%||90%|
When it comes to the autonomous story for Tesla, executing makes up a significant portion of the predicted growth of the company. While Musk has never confirmed an interim step of having Uber-style competitor of a human-driven ride-hailing service, Ark, clearly thinks they should.
Ark Invest’s new model has Tesla earning as much as $20 Billion in operating profit by 2025 as a bull case. Personally I think the likelyhood of this occurring is incredibly low, with any potential revenue opportunity being offset by a distraction to the larger mission of replacing drivers completely and making our roads safer.
With much debate about the FSD Beta lately, it’s hard to deny that the videos shared online show the promise of the technology and Ark are clearly seeing a massive uptick in adoption, once the technology (and regulation) are ready to go. The take rate for FSD currently isn’t great, possibly around 10%, while Ark predicts around 60% of Tesla vehicles will be using it in 2025.
|Percent of All Teslas on Autonomous Platform in 2025||0%||60%|
As bold as these numbers sound from Ark, it’s important to realise these do not include all Tesla operations, with a disclaimer at the bottom of the post.
Note: We do not model Tesla’s utility energy storage or solar business in our models. We also have not modeled bitcoin assumptions in our model.
Read the full report on Ark Invest.