Cathie Wood’s Ark Open Source Model Predicts Tesla Shares Will Hit $4,600 by 2026

April 19, 2022

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1:09 am

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41 comments

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Economics

ARK’s Monte Carlo Simulation Results posted at Ark Investments

Ark’s Open Source

ARK analysts Tasha Keeney says the Expected Value For Tesla In 2026: $4,600 per Share.

We provide this open-source model to the public because we believe doing so strengthens the quality of our research. By sharing our assumptions and modeling methodologies we hope to solicit constructive feedback and criticism. As with open-source software, we believe that open-source research will prove to be more robust and accurate than research conducted non-transparently behind closed doors.

Methodologically, we arrive at our base-case share price by averaging one million simulations produced by our Monte Carlo model.

This research update is based on ARK’s new open-source Tesla model, which incorporates distributions for 38 independent inputs to simulate a range of potential outcomes for the company.

Tesla’s prospective robotaxi business line is a key driver, contributing 60% of expected value and more than half of expected EBITDA in 2026.

Assumptions

Tesla sold 900,000 vehicles in 2021. ARK assumes the bear case scenario of 10 million cars in 2026 with the bullish case at 17 million.
Curiously, the bull market selling price is 30,000 with a bear market selling price with an average selling price of $38,000.
The bear market total gross margin is 50% while the bull market gross margin is 56%.
The compound annual growth rate CAGR is 24% per year in the bear case and 42% in the bull scenario.
Tesla robotaxi delivery best case starts this year, worst case 2030, otherwise between 2023 and 2026 with a midpoint of 2024. the article states Tesla will commercialize autonomous ride-hail in 2024.
Tesla enters the insurance business and will sell 50% of its cars with insurance by 2026.
Tesla will capture 50% of the autonomous market outside China and 10% in China.

Modeled Share Price Outcomes

Looking Further Ahead

You can Download the ARK Spreadsheets and make changes to the model if you choose.

I came up with $639 per share in 2026.

Some of my changes may be way off in either direction. But in general, the base spreadsheet seems absurdly optimistic.

Is Tesla really going to capture 50% of the autonomous market outside China and 10% in China?

Will that sales be as big as ARK assumes? 17 million vehicles? Really?

The base case pretty much assumes the rest of the market will stand still. There will be no value added for autonomous driving if every manufacturer has it.

And right now Waymo (Google) is far ahead of Tesla in driving capability. I gave Tesla a very generous cut of China. Five percent would not surprise me in the least.

My generous calculation is Tesla at $639. Since those are 2026 numbers, what is the 2023 bear market valuation going to be.

ARKK Performance

Tesla is ARKK’s largest position with a weight of 8.69%.

What About Recession?

A recession and hard landing is on the way. What will it look like?

Forget About a Soft Landing, What’s the Shape of the hard landing?

None of the near-term valuation factor in a recession or bear market valuations.

Tesla Market Cap Predictions

At $1,000 per share Tesla has a market cap of about $1 trillion.

By 2030 ARK predicts a share price of about $22,500 equating to a market cap of roughly $22.5 trillion.

US Real GDP in 2021 was $19.8 Trillion.

ARK is predicting the valuation of Tesla will exceed the entire US real GDP by the early 2030s.

Yes, this is more than ridiculous. It also says something about ARK’s open source share price model.

This post originated at MishTalk.Com.

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41 Comments

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Johnson1

2 years ago

thanks. Good laugh.

I guess she did not see the Mercedes Benz has a test car that just did 600 miles on a charge.

I remember 10 years ago sitting on a Cisco call when one of John Chambers gurus said IOT (Internet of Things) would be a 15 trillion dollar business. I was thinking to myself, this person does not realize the entire GDP of the U.S. at that time was 15 trillion. It was a conference call so I could not raise my hand up an ask

Treepower

2 years ago

Garbage in, garbage out.

Lisa_Hooker

2 years ago

This reminds me of the old forecasts for the electronics industry.

Five years of projections with only two years of history.

StukiMoi

2 years ago

Stupid people have it it too easy these days. As long as they happen to be close to The Fed, they really can believe in tooth fairies. Safe in the knowledge, that someone else will be robbed in order to “Make all their Dreams Come True. If only they are stupid enough to believe them strongly enough…..”

Billy

2 years ago

This is the same Cathie Wood who predicted deflation for 2022.

Sep 29, 2021 -Bloomberg “Cathie Wood: Next Big Risk Is Deflation”

May 19, 2021 -Bloomberg “Ark’s Cathie Wood Says U.S. Set Up for ‘Massive’ Deflation”

May 16, 2021 -The Wealth Advisor “Cathie Wood: The Big Risk Is Deflation, Not Inflation”

Newsmax: “ARK’s Wood Turns Focus to Deflation, ‘Stay Connected …”

Techopian: “Cathie Wood is right about deflation and tech”

Reuters July 13, 2021 “ARK Invest’s Cathie Wood looks past rising consumer prices to focus on deflation”

Jan 2022 “Cathie Wood rejects Fed’s inflation ‘jawboning,’ pivots back to deflation narrative”

FromBrussels

2 years ago

Yeah sure , personally I think Tesla will be worth 100,000 $ in 2027 ! LOL! Idiots making similar predictions, because that s what they ‘thrive’ on, are in complete denial of the current state of affairs on a overpopulated planet horribly affected by climate change in combination with ruthless destruction of the environment, with on top of that the imminent danger of a yet another US provoked war, that would make UK provoked WW1 and WW2 look like a garden party on a rainy day ! Even algos are in a state of denial these days, it seems…..Ooops, excuse me , that s right, I forgot for a minute that the FED and CBs in general will save our as ses, no fn doubt about it …. so apart from Tesla I call the DOW at 100K too….I do apologise for m fn ignorance ….

AWC

2 years ago

While we’re talking book here, maybe I’ll load up on SPDR and predict 9000 on the S&P for 2026?

AWC

2 years ago

Reply to AWC

Certainly some chartist can come up with a goal seeking model for that?

thimk

2 years ago

“In days of old when knights were bold” stock valuations where based on the present value of future free cash flows. Makes cents to me.

RonJ

2 years ago

“The 2030 estimate will be close to the entire US Real GDP.”

I see a field of Tulips.

FromBrussels

2 years ago

Reply to RonJ

….’I see red roses too, I see them bloom for me and you and I think to myself… what a wonderful woooorld’….

dbannist

2 years ago

There are a couple more issues besides the absurd valuation:

1. 10 million cars a year requires nearly 10x as much lithium as in currently mined each year. Since lithium mines takes years to get going it is physically impossible for all the car companies in the world combined to produce this many cars by 2030, let alone Tesla.
2. Something that favors her valuation (in a very slight way) is inflation. 3k valuation for TSLA isn’t the full GDP for the USA when high inflation is considered. That being said, it would take an absurd level of inflation to make that 3k valuation seems reasonable. It’s far more reasonable that Cathie Wood’s Ark is in trouble and she knows it and is trying to cherry pick data that attracts investment.

Her fund is like Lehman….looks ok on the outside but rotten on the inside. When the tide goes out it’s going to reveal what her fund really is: Hot air.

Steve_R

2 years ago

What people seem to not understand about Tesla is that they have the largest coast to coast charging system. Nothing is comparable to them. I have heard that Musk is considering leasing this to other car companies. As far as price, it all depends of the Fed, if we had 5% interest rate then the market will be cut in half, the question is how far can the Fed can raise interest rates with a national debt to GDP ratio of 140%.

dbannist

2 years ago

Reply to Steve_R

They certainly have a lot going for them.

But that doesn’t change the fact that their valuation is absurd.

Steve_R

2 years ago

Reply to dbannist

I agree valuation is hard to wrap your head around. It is also absurd for lumber to go from 400 to 1700 or oil from 10 to 130 by firms that never take delivery of the product. This is due to the Fed running the economy hot. As far as Tesla, I personally would not like to bet against a person that just was able to help with communications in a warzone with his Starlink company. All the best to you!

dbannist

2 years ago

Reply to Steve_R

To make a fair comparison to lumber, which is invalid (comparing commodities to PE ratio’s is nuts, honestly)

But nevertheless:

Lumber would need to be at 6000 compared to the normal baseline for that commodity. Assuming a normal price of oil around 60 a barrel and making it 15x that oil would need to be valued at 900 a barrel for a valuation like TSLA has, if you want to compare PE ratio’s to commodities.

Obviously 6000 for lumber and 900 for oil would make those commodities severely overvalued, by any metric. Just like Tesla, which has a value that is similar to 6000 lumber and 900 for oil.

Valuation isn’t so difficult if you see the inherent problem with a barrel of oil at 900 bucks or LBS at 6000. That is the value of TSLA compared to commodities. I fully realize that you can’t compare that way, but you made the comparison, not me. I was just following through with the full ramification of that idea.

Steve_R

2 years ago

Reply to dbannist

valuation is absurd, is the reason I said that, the Fed is running the economy too hot. the likes of Goldman, JPM, etc that never take deliver for oil etc (60% of trades never take delivery) this hurts the economy more then anything. As far as overvaluations in the stock market, housing market, etc, it will depend on what the Fed does. (JMHO)

StukiMoi

2 years ago

Reply to Steve_R

“What people seem to not understand about Tesla is that they have the largest coast to coast charging system.”

It seems they also don’t understand that Bubba-the-dude-with-a-gas-can, as in any Bubba with any gascan, has a charging network about one million times the size of Teslas…. Which covers any coast to any coast. No cherrypicking, hype, nor nonsensical assumptions required.

Doesn’t mean offering a “service” almost infinitely inferior, for a much higher price and with much less convenience, can’t be forced into appearing nominally valuable. This is the DumAge, after all. But there are some limits to how far rank stupidity alone can carry you, even in the DumbAge, before weird-language speaking hordes of supposed bogeymen will simply overrun you and leave your squalid remains in their wake to be entirely , and justifiably, forgotten.

BDR45

2 years ago

My first reaction is where do I buy the same drug Mrs. Wood and her analysts are using, and my second thought is maybe inflation will be so pervasive and high, that those price targets will be met, but the dollars will only have half of their 2022 purchasing power.

StukiMoi

2 years ago

Reply to BDR45

You likely have to be Born That Way………….

Heavy, persistent indoctrination; starting from a very young age and never, ever relenting; can get you part of the way. Close enough you may even consider the drivel for a minute or two. But to genuinely believe it on a more permanent basis, requires pathologies far too complex and far reaching to graft on to people not already afflicted from birth.

Casual_Observer2020

2 years ago

I think Rivian will overtake Tesla at some point. With backing from Amazon, Ford and others, they have come up with something most American consumers can latch on to. Aside from the sleek look of Tesla cars (which most people in the midwest or south just don’t drive anymore due to truck/SUV consumption), Tesla trucks/”SUVs” are hideous looking at best. I think Musk is somewhat showing his European roots here and out of touch with the American consumer overall. Tesla cars are generally a liberal/coastal thing and there in pockets everywhere else, especially amongst people who are younger yuppies. I think Rivian is positioned to build more of what consumers will want in most places in America. Musk is an innovator but as with most consumer innovations, he will have come up with something better for most people at a better price. Tesla reminds me of original the original Apple MAC in the 80s under Jobs while Rivian is going down the IBM/Microsoft/Gates path.

Doug78

2 years ago

Love the company, love the cars and I especially love the stock price. Musk built the best car firm with the best technology and by far the best manufacturing. Owning Tesla shares might give you preferential treatment when Starlink and SpaceX go public.

One June 24th, 2021, Musk tweeting the following in response to a question on Twitter:

At least a few years before Starlink revenue is reasonably predictable. Going public sooner than that would be very painful. Will do my best to give long-term Tesla shareholders preference.

— Elon Musk (@elonmusk) June 24, 2021

I am not selling even at this price.

Doug78

2 years ago

Reply to Doug78

In September 2020, Musk confirmed on Twitter that he will give retail investors priority as well.

We will probably IPO Starlink, but only several years in the future when revenue growth is smooth & predictable. Public market does *not* like erratic cash flow haha. I’m a huge fan of small retail investors. Will make sure they get top priority. You can hold me to it.

— Elon Musk (@elonmusk) September 28, 2020

Onni4me

2 years ago

ARK’s Monte Carlo Simulation…do they spin a roulette wheel to come to these valuations?

To me the valuations seem absurd. That said, who knows what level of inflation and crazy money printing we will reach in the coming years. Old 100 dollars might be the new 1000 dollars.

Nuddernoitall

2 years ago

After Wood’s ETF’s soared in 2020, those same investment vehicles have come back to Earth with a giant thud. Of course Wood has been scorned by the financial elite and more painfully, from many of her prior investors. The research of a TSLA “middle” price target four years from now does seem very high to me, but I’m giving the ole girl some credit to publicize it and “own” her number. Actually, her price target and Mish’s both seem like outliers to me, but a lot can change in 4 years. Maybe she’s spot on; maybe Mish is spot on; or maybe TSLA is priced in four years between those two divergent projections. From my perspective, Wood will set the wolves howling with her open source research model price target, yet everyday “esteemed” financial institutions publish supposedly well thought out price target info from a cadre of highly educated analysts. And more times than not, their research-driven price targets are garbage. And, not to go too far off topic here, I do believe those analysts’ projections do a great disservice to the market and to many who invest in it (but of course not to their employers).

Zardoz

2 years ago

And winged simians shall issue forth from my posterior.

Fish1

2 years ago

Since Tesla was a California based phenomena I am not surprised to see all this FUD coming out of the Midwest and East Coast. The Wall Street analysts have been so incredibly wrong about Tesla from day one. This illustrates the whole Eastern bias of ICE cars, market evaluations and any other innovative thinking. I bought my Model X 3 years ago and just took it in to be “serviced”. When I picked it up I asked what had been done. The windsheild wiper fluid was low. Stop this insane anti-Tesla $hit and quit sending money to Putin, Maduro, The Sheik and all the other despots. This thing was American made and is spectacular.

Zardoz

2 years ago

Reply to Fish1

I own one, and think it’s great, but I think her predictions are insane.

TexasTim65

2 years ago

Reply to Fish1

3 years is not a very long time. ICE vehicles don’t have repair bills in that time either because they like your Tesla are still under warranty.

It is true that electric vehicles have FAR fewer parts and will therefore have lower service costs in years 4-9. But always lurking in the future is the massive bill that will happen when the battery has to be replaced (8-10K right now). At that point the car is essentially junk because no one is going to pay 8-10K to replace the battery on a 9-10 year old Tesla.

You can say 9 years is a long time and it is, but the average vehicle age on the road in America right now is 12 years old which says ICE vehicles are still lasting a very long time and could be that the age is brought DOWN by electric vehicles being scrapped once the battery needs replacement.

Bombillo

2 years ago

Reply to TexasTim65

Nothing has been done in 3 years. No adjustments, oil changes zip. The regenerative braking means no brake jobs either. Just changed out the tires at 33 k miles and the technician said the brakes looked “new”. More FUD anyone?

TexasTim65

2 years ago

Reply to Bombillo

As an FYI, I just changed out the brakes on my 5 series BMW at 90K miles for the 1st time. Modern brakes last a LONG time on all quality vehicles.

So not surprised yours look new at 33K.

Bombillo

2 years ago

Reply to TexasTim65

You do know what regenerative braking is don’t you? You don’t touch the brakes to slow down, just let the car’s momentum turn the e-motors to make electricity and put it back into your batteries. The pads never touch anything. Dump the BMW, last century’s technology.

Zardoz

2 years ago

Reply to TexasTim65

I think you’re talking about the time when the battery only holds 80% of its capacity, which is still pretty useful. Would guess you’d have 200k miles or so before you get under 100 mile range. So it’s still useful even without a new battery.

I’ve bet that battery replacements will be better and cheaper in 9 years. If not, I will have spent luxury car money, and enjoyed the cutting edge tech. Will have saved 15k on gas, at least. It’s pretty sweet to roll past those $6 a gallon signs, and I don’t see it going under 4 ever again.

The whole experience has been a bit of a gamble that so far has paid off handsomely. Best new car experience I’ve ever had, by far.

TexasTim65

2 years ago

Reply to Zardoz

“I’ve bet that battery replacements will be better and cheaper in 9 years.”

I’ll take that bet. The rare earth materials required are going to skyrocket in price as more EV’s get built and limits of those rare earth materials make them increasingly expensive.

A massive break though in battery tech is needed within the decade for EV’s. As in they need to be made of materials that are cheap and abundant.

Maximus_Minimus

2 years ago

May have something to do with lithium price which left oil price increase in the dust.

link to mining.com

thimk

2 years ago

Reply to Maximus_Minimus

yes , there’s the rub :

link to forbes.com

Sunriver

2 years ago

ARK=FOMO on steroids.

I see $4,600 a share for Tesla in 2026 only if the US government outlaws all gas and diesel automobiles OR subsidizes electric vehicles/solar arrays to the point where a $30 federal debt is lunch money.

Autonomous electric vehicles powered by solar arrays will someday win the day, but Tesla is not the only game in town.

Ultimately,

‘We live in an inflationary economy that is fundamentally deflationary’.

As you would say, I’ll take the under.

Zardoz

2 years ago

Reply to Sunriver

If everything keeps catching on fire, and some big chunks slide off Antarctica, I could see gas cars being outlawed.

TheCaptain

2 years ago

Cathy Wood is the next Meredith Whitney.

darthluzak

2 years ago

Maybe there will be no landing at all, and we are on a rocket to a place we have never been before. If Fed s balance increases by another few trillion, why not Tesla at $5k, Au at 10k, BTC $500k? Diesel 10 bucks a gallon, with a good social score, of course.

Pete Venkman

2 years ago

What a Kook.

Cathie Wood’s Ark Open Source Model Predicts Tesla Shares Will Hit $4,600 by 2026

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