Tesla gets generous price target projection from ARK without several crucial factors

Tesla got a new, generous price target projection from analyst Cathie Wood and her firm ARK Invest, even though it left out several massive factors.

According to ARK’s latest Tesla projection report, which was released on Wednesday, the firm expects the company’s value to swell to $2,600 per share, with a bull case of potentially $3,100 and a bear case of $2,000.

“ARK estimates that nearly 90% of Tesla’s enterprise value and earnings will be attributed to the robotaxi business in 2029, as shown below. Meanwhile, electric vehicles could approximate a quarter of total sales and ~10% of Tesla’s earnings potential, as we believe the robotaxi business will have much higher margins. The charts below break down attributable revenue, EBITDA, and enterprise value by business line,” its analysis breakdown said.

It is important to note ARK Invest has been particularly bullish on Tesla and its business model for some time. However, it was sure to note that in its latest projections, it did not factor in robotics, as Tesla continues to develop its Optimus Bot and recently stated it has been using it in Gigafactory Texas.

We conservatively assumed that Tesla does not sell Optimus externally in our model, and that Optimus manufacturing savings modestly impact Tesla’s costs in single digit percentages over the next five years.

— Tasha Keeney (@TashaARK) June 12, 2024

ARK broadened this idea in its report:

“We assume that Optimus will have minimal impact on our price target. Over the next decade, we expect Tesla to become a leading manufacturer and service provider of robots that move through physical space, as it will have the opportunity to leverage learnings from robotaxis as well as its in-house inference chips, training compute, and manufacturing scale. Tesla expects Optimus to be completing useful factory tasks by year end. Assuming that it were able to subsume 10-20% of Tesla’s labor hours worked with productivity equal to or twice that of its human counterparts, Optimus could save Tesla $3-4 billion, or 1-2% in manufacturing costs, in 2029.”

In fact, the largest single factor in its analysis is that of the Robotaxi, which accounts for the vast majority of the breakdowns ARK illustrated for Revenue, EBITDA, and Enterprise Value:

There are several things ARK left out of its analysts, and a few of them are arguably groundbreaking and could potentially have a major impact on Tesla’s business in the future:

• Tesla Semi – ARK does not believe the Tesla Semi will “contribute significantly” to the company’s value within the five-year investment time horizon
• Supercharging Network – Tesla Superchargers are “unlikely to generate significant revenue,” although they are essential for EVs
• FSD Licensing – Non-Tesla FSD vehicles are unlikely to debut within the five-year timeframe
• AI-As-A-Service – AI-inference-as-a-service and Dojo training-as-a-service is “probably” outside the five-year timeframe

You can read ARK’s full report here.

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