Cathie Wood Bets Big: Can Tesla Robotaxis Lead Stock to $2600 by 2029?
Cathie Wood, the head of ARK Invest and a renowned Tesla bull, has made a bold prediction: by 2029, robotaxis could account for a whopping 90% of Tesla’s business value and earnings. This bullish outlook depend on the success of Tesla’s self-driving technology and its planned robotaxi service.
Tesla stock is currently trading at about $177 per share, and peaked at about $360 a few years ago. On the eve of Tesla’s annual meeting — where shareholders will either reproach or reward CEO Elon Musk — ARK Investment Management is giving a surprising prediction of where the stock will be in just five years.
The Allure of Robotaxis:
Wood sees robotaxis as a game-changer, offering significantly higher margins compared to Tesla’s current car sales model. Imagine a fleet of Teslas operating as autonomous taxis, generating revenue 24/7 without the need for human drivers. This continuous revenue stream, according to ARK Invest, holds immense potential to propel Tesla’s stock to new heights.
Eventually In 2023, Ark Invest set a price target of $2,000 for Tesla by 2027. Recently, the firm updated this target to $2,600 for 2029.
According to Ark’s new model, nearly 90% of Tesla’s value and earnings in 2029 will come from its robotaxi business.
The firm predicts a range for Tesla’s stock price in 2029, with a low estimate of $2,000 and a high estimate of $3,100. If Tesla doesn’t develop the robotaxi network, the target drops significantly to $350.
Ark’s forecast for Tesla’s 2029 revenue includes 63% from robotaxis and 26% from electric vehicles, with the rest coming from services like insurance and energy storage. They predict a total revenue of $1.2 trillion for that year.
The model also projects $440 billion in earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2029, with 86% from robotaxis and 10% from electric vehicles.
Ark expects Tesla to sell between 5.8 million and 14.4 million electric vehicles in 2029, depending on the scenario.
A key part of this forecast is Tesla launching its robotaxi service, which Ark believes will happen within the next two years. Initially, Tesla is expected to own and operate the robotaxi fleet, keeping all revenue per mile for the first three years. Later, third-party companies might own the fleets, with Tesla earning revenue per mile.
Tesla plans to introduce a dedicated robotaxi vehicle in August 2024. Although current vehicles could be converted into robotaxis, a purpose-built vehicle, dubbed the CyberCab, shows Tesla’s confidence in its self-driving technology’s potential to grow the robotaxi business.
Ark’s projections do not account for potential impacts from the Tesla Semi, Tesla’s Supercharging network, Full Self-Driving (FSD) licensing, or AI-as-a-Service.
Ark is increasingly confident in Tesla’s ability to launch a robotaxi network in the next five years, transforming its business model from one-time vehicle sales to generating ongoing revenue as each car becomes a source of cash flow through AI technology.
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Tesla’s Robotaxi Ambitions:
Tesla has been actively developing its self-driving technology, known as Autopilot and Full Self-Driving (FSD). The company is expected to unveil its robotaxi design by August 2024, signifying a major step towards their autonomous ride-hailing ambitions.
Reaching the $2600 Target:
ARK Invest’s prediction translates to a staggering 1350% increase in Tesla’s stock price over the next five years. This aggressive target heavily relies on the following factors:
- Swift Regulatory Approval: For robotaxis to become a reality, clear and favorable regulations for autonomous vehicles are crucial. Delays or restrictive regulations could significantly impact the timeline.
- Technological Breakthroughs: While Tesla’s self-driving software is constantly evolving, achieving true level 5 autonomy (no human supervision required) may take longer than anticipated.
- Facing the Competition: Tesla is not alone in the autonomous vehicle race. Companies like Waymo and Cruise are also vying for a dominant position in the robotaxi market.
Investing Considerations:
While Cathie Wood’s prediction is certainly exciting, it’s essential to approach it with a dose of caution. Investors should consider the following:
- Market Volatility: The stock market is inherently volatile, and unforeseen events could significantly impact Tesla’s stock price.
- Technological Uncertainties: The development of self-driving technology is complex, and there are no guarantees of a smooth and timely rollout.
- Competition Heats Up: Success in the robotaxi market is far from guaranteed. Tesla will face fierce competition from other industry players.
The Final Word:
Cathie Wood’s prediction underscores the immense potential of Tesla’s robotaxi program. However, investors should carefully evaluate the associated risks before making any investment decisions based solely on this prediction. A balanced approach, considering both the potential rewards and the inherent uncertainties, is crucial for navigating this exciting yet challenging investment landscape.
