Tesla cars recharging
Mario Tama/Getty Images
ARK Invest CEO Cathie Wood is a longtime Tesla bull. Her Tesla models and price targets usually make headlines. That was the case the prior time Wood updated her target. That new target came with a little more fanfare. This time a new target price from ARK has come as a surprise.
Wood expects Tesla (ticker: TSLA) stock to hit $4,600 in 2026. Assuming that would be midyear, Tesla stock would earn investors about 44% a year on average over the coming four-plus years. Over the past four years, Tesla stock has returned about 100% a year on average.
Yes, that is correct. Tesla stock is up about 16-fold, to almost $1,000 from about $60 in April 2018, including the effect of a five-for-one stock split in 2020.
At $4,600 a share, Tesla’s market valuation, including stock options, would be roughly $5.4 trillion or $5.5 trillion.
Wood’s old price target was $3,000 a share, for 2025. The updated number is all about autonomous taxis. “Tesla’s prospective robotaxi business line is a key driver, contributing 60% of expected value and more than half of expected Ebitda in 2026,” wrote ARK analyst Tasha Keeney in a Thursday post on ARK’s website. Ebitda is short for earnings before interest, taxes, deprecation, and amortization.
For 2026, ARK models $843 billion in sales for Tesla and $280 billion in Ebitda. That’s an Ebitda margin of about 34%. The robotaxi business would account for about $284 billion in sales and $151 billion in Ebitda. The implied profit margin with those two figures is about 53%.
To be sure, all the numbers are very aggressive. Wall Street estimates aren’t as reliable the farther out investors look—not every analyst publishes estimates the same number of years into the future. But Wall Street models $133 billion in 2024 sales. That’s an average annual-sales-growth rate of about 25% a year on average. It might be a little low. Still, it’s nowhere near Wood’s roughly 75% average annual-sales-growth rate predicted in her 2026 model.
Tesla is expected to generate about $84 billion in 2022 sales and $19 billion in Ebitda, according to analysts surveyed by Factset. That’s a margin of about 23%. Analysts expect Apple (AAPL), for comparison, to generate roughly $400 billion in 2022 sales and $130 billion in Ebitda. That’s a margin of about 33%.
ARK might have felt the need to increase the target price after Tesla’s Cyber Rodeo held earlier this month to open the new Austin, Texas, manufacturing facility. At the event CEO Elon Musk mentioned that Tesla would build a dedicated robotaxi vehicle. That was all the detail. It could be a new model or an existing model that Tesla plans to operate in a Tesla-owned autonomous ride-hailing network.
Tesla stock didn’t really react to Musk’s robotaxi comment. Tesla stock has slipped about 7% since the Rodeo. The S&P 500 and Nasdaq Composite are down about 2% and 4%, respectively, over the same span.
Wood, however, appeared to notice Musk’s comments.
The highest target price on Wall Street comes from New Street Research analyst Pierre Ferragu. His target price is $1,580 a share. Most Wall Street targets have a time frame of a year, or represent a fair return into the future. Street targets don’t extend to 2026.
Write to Al Root at allen.root@dowjones.com
Source: finance.yahoo.com