Cathie Wood, Ark Funds Lay Out New $3,000 Price Target For Tesla Shares: What Investors Should Know

Ark Funds CEO and Co-Founder Cathie Wood joined Benzinga for the “Raz Report” interview earlier this month. At that time, Wood promised a new price target was coming on Tesla from Ark.

On Friday, it arrived. 

Ark Funds on Tesla: Ark Funds updated its price target for shares of Tesla Inc TSLA to $3,000 in the year 2025.

Last year, Ark Funds listed a split adjusted price target on Tesla shares of $1,400 by the year 2024.

Ark Funds uses a Monte Carlo model, based on a series of simulations to determine the probability of different outcomes with random variables. A total of 34 inputs and over 40,000 possible simulations were used to create the new price target.

The bear case from Ark Funds is for shares of Tesla to hit $1,500 in 2025. The new bull case from Ark Funds is for Tesla shares to hit $4,000 in 2025.

The price target from Ark Funds does not include Tesla’s energy storage or solar business in the models. The impact of the price of Bitcoin is also not included in the model from Ark Funds.

See also: How to Invest in Tesla Stock

Growth Ahead: Ark Funds said Tesla can sell between 5 million and 10 million vehicles in 2025 after new technology and production improvements. Tesla sold over 500,000 vehicles in 2020.

The average sale price for Tesla’s electric vehicles was $50,000 in 2020. Ark calls for that figure to come in between $36,000 and $45,000 in the new price target model.

For the first time, Ark Funds is including opportunities in insurance in its forecasting model.

“Ark estimates that Tesla could achieve better than average margins on insurance thanks to the highly detailed driving data it collects from customer vehicles,” Ark says in the report.

Tesla introduced its insurance product in 2019. It is currently only available in California. Ark believes in the next few years, Tesla could roll out insurance to other states, underwriting its own policies.

Ark Funds updated its pricing model for Tesla to include assumptions on fully autonomous driving. Ark estimates the probability of delivering fully autonomous driving by 2025 at 50%. Ark previously listed a 30% chance by the year 2024.

Related Link: Auto Companies That Catered To Shareholders Instead Of Future Growth Will Be Sorry: Cathie Wood

Ark Funds and Tesla: Wood has been a notable Tesla bull for years. She famously gave a split adjusted price target of $800 that was criticized by many on Wall Street. Her prediction came right earlier this year.

Tesla is the largest holding in the Ark Innovation ETF ARKK with over 3.7 million shares worth $2.4 billion.

Tesla is also the largest holding in the Ark Next Generation Internet ETF ARKW with 1.1 million shares held worth $752.5 million.

Tesla represents 10.5% of assets in both ARKK and ARKW.

Price Action: Shares of Tesla closed at $654.87 on Friday. Tesla shares have traded between $82.10 and $900.40 over the last fifty-two weeks.

Watch the full interview with Cathie Wood and Benzinga here.