Introduction
ARK Investment Management has recently updated its valuation model for Tesla, setting an expected share price of $2,600 by 2029. This model incorporates a comprehensive analysis using 45 independent variables to simulate a range of potential outcomes for Tesla's stock.
Price Projections
According to ARK's Monte Carlo analysis:
- Expected Value: $2,600 per share by 2029.
- Bear Case: $2,000 per share (25th percentile outcome).
- Bull Case: $3,100 per share (75th percentile outcome).
These projections highlight ARK's optimistic outlook on Tesla's growth, driven by its expansion into various high-margin business lines, particularly autonomous ride-hailing.
Key Drivers of Tesla's Valuation
- Robotaxi Business: ARK estimates that nearly 90% of Tesla's enterprise value and earnings by 2029 will come from its robotaxi business. This sector is expected to have much higher margins compared to traditional electric vehicle sales.
- Electric Vehicles (EVs): Despite the focus on robotaxis, EV sales are projected to contribute significantly to revenue, approximating a quarter of total sales and about 10% of earnings.
Business Growth Scenarios
ARK's model simulates numerous scenarios, with the bear and bull cases representing plausible outcomes based on different growth trajectories:
- Bear Scenario: Tesla sells 5.8 million cars, generates $250 billion in EV revenue, and achieves a market cap of $7 trillion by 2029.
- Bull Scenario: Tesla sells 14.4 million cars, generates $394 billion in EV revenue, and reaches a market cap of $10.9 trillion by 2029.
Updated Model Assumptions
ARK has updated its 2023 Tesla model with new assumptions:
- Autonomous Driving: Tesla is expected to launch a robotaxi service within the next two years, significantly impacting its revenue streams.
- Manufacturing Growth: Tesla's vehicle production is projected to grow by 45% annually, scaling from 1.8 million units to between 6 and 16 million units by 2029.
Additional Business Opportunities
While the main drivers of Tesla's valuation are its robotaxi and EV businesses, ARK also considers other potential opportunities:
- Optimus Robots: Minimal impact on the price target in the near term, but a significant long-term revenue opportunity.
- Stationary Energy Storage: Expected to grow rapidly, though secondary to the robotaxi business in terms of revenue contribution.
Conclusion
Based on ARK's comprehensive analysis and updated model, Tesla's stock has the potential to reach $2,600 per share by 2029, with bear and bull cases suggesting a range between $2,000 and $3,100. These forecasts underscore ARK's confidence in Tesla's ability to transform its business model and dominate the autonomous transportation market.
Disclaimer
The projections and price estimates provided by ARK are for illustrative purposes only and should not be considered investment advice. They are based on ARK's assumptions and models, which carry inherent risks and uncertainties.
(This article is paraphrased from ARK's fund)