Catherine Wood, founder and CEO of money management firm ARK Invest, wrote an open letter to Tesla CEO (NASDAQ:TSLA) Elon Musk earlier this week arguing the stock of the electric car maker could spike to $4,000 per share.
“Tesla should be valued somewhere between $700 and $4,000 per share in five years,” Wood wrote, stressing that delisting it would be the wrong decision for the company.
“Taking Tesla private today at $420 per share would undervalue it greatly, depriving many investors of the opportunity to participate in its success”, Wood wrote, adding that in her firm’s view, “TSLA is a deep value stock today.”
ARK Invest, which owned a roughly 0.26% stake, or 580,000 shares in Tesla as of June 30, thinks that as the era of new mobility takes hold, Tesla could shift from a hardware manufacturer with 19% gross margins to a full-fledged “mobility-as-a-service” (MaaS) company. The firm’s thesis is based on the assumption that once that transition is complete, and as Tesla doubles down on Software as a Service (SaaS) and Transportation as a Service (TaaS), its profit margins could quadruple.
“In the $4,000 scenario, our assumptions are conservative: we incorporate profits only from cars and certain autonomous taxi networks, not from trucks, drones, utility scale energy storage, or the MaaS opportunity in China,” Wood wrote.
“Further, we incorporate the roughly $20 billion in dilution that might be necessary to penetrate and scale the latter four markets.”
The TSLA investor also highlighted in her letter the 10+ billion miles of data driving that Tesla’s artificial intelligence (AI) project has. In fact, during the 2Q/18 conference call, Musk and his team claimed that Tesla’s upcoming AI processor-backed autopilot hardware – which is based on the neural network that the company’s AI team have been building – is the ‘world’s most advanced computer for autonomous driving.’
They explained that currently Nvidia‘s DRIVE PX 2 chip in the Autopilot 2.0 hardware suite is capable of capturing and processing 200 frames per second. Tesla claims that its upcoming hardware 3 will be able to handle 2,000 frames per second, an increase of ten-fold. This includes full redundancy and failover should an issue occur.
“Tesla is way ahead of the game,” Wood stated.
In an interview with CNNMoney, Wood said that while she understands many Tesla shorts are skeptical of her firm’s super-bullish $4k target, “even if we are half right, the stock could double.”
Tesla Stock Action
TSLA surged after Musk’s now infamous August 7 “funding secured” tweet earlier this month. The stock jumped from less than $350 a share at the start of the trading day to $387.46 by the end of it.
But since then, due to growing skepticism about Musk’s ability to actually get a private deal done, Tesla’s share price has drifted back down. On Friday, however, it gained nearly 1 percent to $322.82.