In a newly released research and modeling by one of Tesla Bulls’ favorite analysts Tasha Keeney and fellow ARK Invest analysts Sam Korus and Brett Winton, Based on their updated expectations for electric vehicle (EV) cost declines and demand, as well as their estimates for the potential profitability of Robotaxis, in 2024 popular electric car maker Tesla is expected to reach a value per share of $7,000.
Ark Invest has a Golden Goose with a 12% probability that Tesla share will hit $22,000 price target if Tesla dominates the Autonomous RoboTaxi industry and successfully wipe out all dinosaurier ICE car makers. This model is said to be based on Tesla lowering cost, builds more factories around the world efficiently, and launches its autonomous network.
Ark Invest has a price target of $3400 in a No Autonomous case, but Tesla will become a High Functioning Ev Company. This case has a 28% probability and a 70% cumulative probability. This case Predicts Tesla will lower costs and build factories efficiently, but can’t launch its autonomous network.
In Ark’s Bear Case: there is a 25% likelihood that Tesla trades at or below $1500 in 2024. In Ark’s Bull Case: There is a 25% likelihood that Tesla trades at or above $15000. A median expected value equals $7000 based on expected value being greater than median value due to upside skew from autonomous.
According to Ark research and modeling three key independent variables are critical to understanding Tesla’s potential:
- Gross Margins – Will Tesla’s cost of manufacturing vehicles continue to fall in line with Wright’s Law? If so, what will be the average selling price of Tesla’s vehicles?
- Capital Efficiency – What is Tesla’s cost per unit to build new production capacity?
- Autonomous Capability – Can Tesla launch a fully autonomous taxi service successfully?
In August 2018, ARK published an open letter with an extract of our TSLA valuation model communicating why we believed taking Tesla private at $420 per share would deprive shareholders of significant returns. Since then ARK has updated its TSLA valuation regularly. Based on new research, we are sharing our latest model to clarify what we believe is TSLA’s potential.
Based on our updated expectations for electric vehicle (EV) cost declines and demand, as well as our estimates for the potential profitability of robotaxis, our 2024 expected value per share for TSLA is $7,000. To arrive at that base case, ARK has developed a probability analysis with bear and bull price estimates, as detailed below:
In an interview with CNBC squawk alley two weeks ago, Ark Invest CEO Catherine Wood promised audience she will soon be releasing their latest Bullish Case model, and she has kept her promise.
“As shown below, we assume average selling prices (ASPs) must decline to access greater levels of demand. We believe that assumption is conservative, especially given the fact that Tesla’s next two vehicles, the Model Y and Cybertruck, have an ASP higher than the Model 3. In our model, we adjust ASPs accordingly.” – Ark Invest
According to ARK Invest, Tesla will be more capital-efficient than traditional automakers. The amount of capital required to produce a vehicle powered by an internal combustion engine in the US has steadily increased. Over the last five years or so, the auto industry has spent more than $14,000 in fixed assets for every vehicle produced per year. A simple calculation – 50% of $14,000 – indicates that an EV plant could be installed for $7,000 per unit size.