While many Wall Street analysts cut their price targets on
Tesla
shares after a disappointing earnings report, Cathie Wood’s ARK Invest went a different direction.
It’s almost a Rite of Spring. On Thursday, ARK lifted its price target for Tesla (ticker: TSLA) from $1,533 (after the stock’s 3:1 split) to $2,000 a share. The average analysts’ price target for Tesla following its first-quarter results, reported Wednesday, sits at about $192, according to FactSet, down about $10 over the past couple of days. ARK’s target, which is more than 10 times higher than the Street’s number, is for 2027.
Wall Street’s price targets can be used in one of two ways: The price analysts expect the stock to trade at over the coming 12 months or the price investors can pay to earn an above average return out into the future. Still, the direction ARK and Wall Street’s price targets are headed can be compared.
Each time ARK has updated its price target—it happened in March 2021 and April 2022—it’s gone higher. And each time, the spread between Wood’s firm and Wall Street has grown. The ARK-to-Wall Street ratio was closer to 5:1 in 2022 and roughly 4:1 in 2021.
A big difference between ARK and Wall Street lies in their assessments of the opportunity that can be found in self-driving cars and robotaxis. ARK says that technology is around the corner and projects $345 billion in earnings before interest, taxes, depreciation and amortization, or Ebitda, by 2027, with about $155 billion coming from self-driving technologies. Wall Street doesn’t have estimates that reliably project 2027 numbers.
ARK’s estimates are incredibly ambitious compared with Wall Street’s.
Apple
(AAPL), by point of comparison, is expected to generate roughly $135 billion in Ebitda next year, while analysts expect Tesla to generate about $30 billion in 2024.
In 2022, Tesla’s Ebitda was nearly $20 billion. ARK expects the company to grow that figure 17-fold in five years. That would be an extraordinary and historic achievement.
ARK told Barron’s in an emailed statement that many companies have scaled Ebitda by ten times over a short time frame.
“Tesla is an unprecedented company…they have the largest deployed fleet of robots in the world, and we believe those robots stand to become massively more valuable when, and we do think it is when not if, Tesla activates those robots as robotaxis,” the company said, referring to Tesla vehicles as robots.
ARK’s target, which puts Tesla’s valuation at $6 trillion, doesn’t all come down to self-driving cars. ARK models about $1 trillion in 2027 sales, with $600 billion coming from cars. That’s in the range of what sales at
Volkswagen
(VOW. Germany) and
Toyota Motor
(TM)—the world’s two largest auto makers by sales—are expected to generate combined in 2024, according to Wall Street.
ARK’s says its price target would be about $1,000 a share, even without its robotaxi assumptions.
Bullish projections? Yup, and that’s saying the least.
Despite Wood’s 2027 call, investors are focused on near-term challenges like vehicle pricing and a weakening economy. Tesla stock closed up 1.3% Friday after falling 9.8% on Thursday following earnings. The
S&P 500
and
Nasdaq Composite
both rose about 0.1%.
Write to Al Root at allen.root@dowjones.com
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