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Tesla (TSLA) is the largest electric vehicle (EV) manufacturer in the world, and has already created massive wealth for shareholders. Since its IPO in July 2010, TSLA stock has returned over 14,000% to shareholders, easily outpacing the broader markets.
Today, TSLA trades 55% below all-time highs, and is valued at a market cap of $589 billion.
In the last two years, Tesla has been wrestling with macro headwinds, such as inflation and rising interest rates, which has led to lower consumer demand for EVs. Moreover, rising competition and sluggish demand has forced Tesla to lower its vehicle prices multiple times, resulting in narrower profit margins.
However, according to Cathie Wood - one of the most widely followed investors on Wall Street - Tesla stock can surge by a whopping 1,300%+ by 2029, and remains a top investment choice in 2024. Let’s see why.
ARK Invest is Bullish on Tesla
Cathie Wood’s company, ARK Invest, recently published its latest research on Tesla, and it expects TSLA stock to touch $2,600 per share in 2029. The model has a bear case price target of $2,000 and a bull case price target of $3,100, compared to Tesla’s current price of $185.
The investment firm emphasized that its model incorporates distributions for 45 independent inputs to simulate a range of potential outcomes for Tesla. Notably, ARK Invest estimates that around 90% of Tesla’s enterprise value and earnings will be tied to its robotaxi business in 2029. Its EV business will account for 25% of total sales and 10% of earnings potential.
According to ARK Invest, Tesla will launch a robotaxi service within the next two years. The investment firm emphasized that if Tesla shelves the robotaxi plan, its target stock price will be significantly lower at $350.
EVs and Optimus
In ARK’s expected value case, Tesla’s vehicle production will increase 45% annually through 2029, after which it expects the EV maker’s ability to scale to depend on new factory openings. It explains that robotaxis are likely to ease manufacturing scaling by simplifying vehicle designs and by generating additional income from cash flow generative rides. The report also assumes that a majority of robotaxis will be sold to fleet owners, which would simplify Tesla’s sales funnel.
Lastly, ARK Invest said that it expects Optimus (Tesla’s robotics business) to have a minimal impact on its price target. In the next decade, Tesla is likely to lead the robot manufacturing segment as Optimus will begin completing useful factory tasks by the end of 2024.
If Optimus can reduce labor hours by 10%, it could save the company $3 billion in manufacturing costs in 2029. However, the humanoid robots business could be a $24 trillion market at scale, providing Tesla with a generational opportunity to grow its revenue at an accelerated pace going forward.
Is Tesla Stock a Potential Goldmine?
ARK Invest’s extremely bullish outlook depends on the success of the robotaxi, which in turn will drive demand for EVs through 2029. A price of $2,600 would make Tesla the largest company in the world, as it would command a market cap of $8 trillion.
While the financial model may seem exaggerated, a lot depends on Tesla’s upcoming robotaxi event in August 2024. In the last few years, Elon Musk has failed to deliver on his lofty goals, given that investors are still waiting for a fully autonomous EV. I wouldn’t bet against Elon Musk, but a 1,329% stock price gain for Tesla seems extremely unlikely at the moment.
Out of the 32 analysts covering TSLA stock, eight recommend “strong buy,” two recommend “moderate buy,” 16 recommend “hold," and six recommend “strong sell," for an overall “hold” consensus.
The average target price for TSLA stock is $176.45, which is a discount of about 3% to the current trading price.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
