Cathie Wood’s new Tesla price target is gone

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Founder of ARK Invest and

adze

bull Cathie Wood has released a new Tesla target price. This is doozy.

Wood expects Tesla to reach $ 3,000 per share in 2025. That means Wood expects to earn an average of about 50% a year between 2025 and 2025, based on Tesla’s Friday closing price of $ 654.87 per year. action.

This would make Tesla worth about $ 3.6 trillion based on outstanding shares, including stock management options and other potential shares.

Apple

(AAPL), by comparison, is worth about $ 2 trillion today. Apple should earn an average of about 30% a year to retain its title as the most valuable company in the United States.

A target set in 2018 was $ 800 per share. At the time, it was an aggressive target, with Tesla shares trading at around $ 70. But stocks hit $ 800 in early 2021, earning investors more than 100% a year on average since early 2018. It was an incredible race.

An important reason for the latest target price increase seems to be a higher potential for a taxi business.

“In our latest evaluation model, ARK assumed that Tesla had a 30% chance of providing fully autonomous leadership in the five years ending in 2024,” says ARK’s research paper. “Now, ARK estimates the probability is 50% by 2025.”

Armed with autonomous driving, Tesla-operated robotaxis could translate into $ 160 billion in additional Ebitda (earnings before interest, taxes, depreciation and amortization) for the company. Tesla generated about $ 4.8 billion in Ebitda last year.

Tesla’s management, in turn, aims to increase unit volume by 50% per year in the foreseeable future.

Barron’s recently guessed where Wood’s new target price could land. Our estimate was $ 2,300 per share. It was not a projection based on fundamental elements. Instead, Wood said Barron’s Jack Hough expected the shares to perform substantially better than the 15% rate of return barrier to buying a stock. We considered that an average annual return of about 30% was substantially better than 15%, but we were low.

Tesla shares have recently hit an obstacle. Higher interest rates have affected higher-growth stocks like Tesla more than others. For starters, higher interest rates make financing financing more expensive. Second, high-growth companies generate most of their cash flow in the future. Higher rates make the promise of future cash a little more attractive, relatively speaking, than the higher yield on bonds today.

The yield on the 10-year treasury note has recently risen above 1.7%, up by about 0.5% in recent weeks.

Tesla ‘s stock has fallen about 7% so far, following comparable profits

S&P 500

and

Dow Jones Industrial Average.

The stock is down about 27% from a 52-week high in January. At that time, the yield on the 10-year treasury bill was approximately 1.1%.

Write to Al Root at [email protected]