By CCN: Tesla's stock is getting clobbered daily now that Wall Street has lost confidence in the ability of Elon Musk's company to increase sales. But there’s one bull that’s swimming against the current, claiming that the market has got Tesla all wrong. Ark Invest’s…
By CCN: Tesla’s stock is getting clobbered daily now that Wall Street has lost confidence in the ability of Elon Musk’s company to increase sales. But there’s one bull that’s swimming against the current, claiming that the market has got Tesla all wrong.
Tesla bull Ark Invest reportedly holds a substantial stake in the electric vehicle maker. The firm remains upbeat about the company’s prospects despite recent concerns that demand for Tesla cars is falling off a cliff.
Ark Invest analyst Tasha Keeney recently said in a CNBC interview that Wall Street is “misunderstanding the Tesla story.” The firm suggests Elon Musk’s vision for Tesla could boost the stock to $560 even in a bear-case scenario over the next five years, which is nearly triple the current level.
Ark Invest analysts justified their target, stating:
“Even if full autonomy turns out to be ‘science fiction’ and Tesla cannot produce an autonomous car, Ark estimates that the electric vehicle opportunity alone would boost its stock two-to-sixfold from $195 today to $560-$1,200 by 2023.”
Ark Invest chief Catherine Wood last year said that Tesla’s stock could go up to $4,000 in a best-case scenario. The analysts tried to justify that massive price target as well:
“If Tesla does solve for full autonomy, however, and its electric vehicle production surpasses our bear case estimates, TSLA could scale significantly higher than our previous $4,000 price target during the next five years, thanks to our newly introduced bull case for electric vehicle volumes.”
But a closer look at Ark Invest’s thesis makes one wonder if the investment management firm is smoking up like Elon Musk.
Ark Invest estimates that Tesla will sell at least 1.7 million cars in 2023, generating $82 billion in revenue at an average selling price of $48,250. In this bear case scenario, the firm expects Tesla’s enterprise value to shoot up from $47 billion at present to $120 billion, leading to a massive jump in the company’s stock price.
But getting to 1.7 million cars a year is a task for Tesla. Elon Musk believes Tesla can deliver around 400,000 cars this year, but it missed Q1 numbers by a wide margin.
Tesla could fall short of its projected delivery numbers for 2019 if things don’t get better, though a “leaked” email by Musk suggests that the company could clock record deliveries this quarter thanks to a production ramp. But that didn’t save TSLA from losing more value thanks to the company’s history of over-promising and under-delivering.
Tesla has been forced to cut the price of older Model X and Model S vehicles as there are concerns that demand has peaked. Moreover, sales of the Model 3 had nosedived earlier this year despite the car’s affordable price point. There are also concerns that the growing population of older Tesla cars is hurting demand for new vehicles, ultimately weighing on the stock price.
Finally, Elon Musk has conceded that the company is running on fumes with enough cash for only the next 10 months. That’s why he is going to extreme lengths to cut costs.
Given all the challenges the company is facing, Ark Invest’s bear-case expectation that Tesla’s deliveries will increase seven-fold as compared to last year’s level of 250,000 and send the stock to new highs is a pipe dream. The company is on the ropes and is struggling to survive; so wild claims that Tesla’s stock will triple even in the worst situation don’t make sense.
Disclaimer: The views expressed in the article are solely those of the author and do not represent those of, nor should they be attributed to, CCN.
This article was edited by Gerelyn Terzo.
Last modified: January 10, 2020 3:36 PM UTC