By Tomi Kilgore
The worst-case scenario is that Tesla's stock would only rise to $2,000 in 2029, Ark says, while the best-case target is $3,100
Shares of Tesla Inc. surged Wednesday after Cathie Wood's Ark Invest said they should rocket more than 15-fold in five years as the electric-vehicle maker evolves into a more profitable robotaxi company.
"Ark's updated open-source Tesla model yields an expected value of $2,600 per share in 2029," according to an Ark Invest report.
The stock (TSLA) rallied 3.3% in morning trading after falling 4.1% amid a three-day losing streak through Tuesday. Ark's expected 2029 price would represent a 1,376% gain from current levels.
Tesla's stock has run up 1,163% over the past five years, while the S&P 500 index SPX has advanced 89% over the same time.
Ark's call comes a day before Tesla shareholders vote on Chief Executive Elon Musk's $56 billion pay package and on whether the company should change the state where it is incorporated to Texas from Delaware.
Read: Tesla shareholders should pass Elon Musk's pay package, or else, analyst warns
Also read: Elon Musk drops suit against OpenAI's Sam Altman in latest chapter of AI saga
Ark also put out a 2029 "bear case" target for Tesla's stock of $2,000 and a "bull case" target of $3,100, which implies a worst-case gain of 1,035% and a best-case rally of 1,659%.
Ark said its Tesla model incorporates 45 independent inputs to suggest a range of potential outcomes - a Monte Carlo simulation - for the stock. The bear-case target represents the 25th percentile of Monte Carlo outcomes and the bull-case represents the 75th percentile.
The reason for Ark's bullish outlook is that in 2029, it believes nearly 90% of Tesla's enterprise value and earnings will be attributed to its robotaxi business, which is expected to have "much higher" margins.
The electric-vehicle business is expected to generate about a quarter of total sales in 2029 but only about 10% of Tesla's earnings.
Ark's model projects 2029 revenue to be $1.2 trillion, or about 12.4 times 2023 revenue of $96.8 billion. The company's enterprise value, or the value of all of its assets, is expected to be $8.2 trillion.
That means the ratio of enterprise value to sales is expected to increase to about 6.8 from the current reading of about 5.6.
Tesla's stock is currently the largest holding of Cathie Wood's flagship Ark Innovation exchange-traded fund ARKK, with a value of $694.72 million as of Tuesday's close.
Tesla's stock is the second-largest holding of the Ark Autonomous Technology & Robotics ETF ARKQ, with a holding value of $86.93 million as of Tuesday's close, and the fourth-largest holding of the Ark Next Generation Internet ETF ARKW, with a value of $116.42 million.
-Tomi Kilgore
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06-12-24 1132ET
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