ARK’s Price Target for Tesla in 2025 | Hacker News Reader

ARK’s Price Target for Tesla in 2025

ark-invest.com

60 pointsmg81 comments

This is not an analysis, this is grabbing a bunch of numbers out of the air without supporting arguments... "Autonomous Ride-Hail Revenue (net, billions)" $327 billion in 2025? FSD won't be out by then, I am certain. The edge cases are still too poorly worked out. For instance, will it slow down seeing a child run after a ball on the pavement? Or can it see "through" cars/buses? KNOWING where bicyclists are instead of only SEEING them is vital in the Netherlands, where we share our road with them.

And lets just DOUBLE our profit margin on electric vehicles LOL. When the competition is getting increasingly fierce, GM, Volkswagen and other tech companies with very deep pockets (Apple, Microsoft, Google) working on self-driving technology and electric cars...

ARK seems to think that Tesla operates in a void, without any competition. And that they can set the price point in 5 years.

yup, watch all the big guys go full on amazon and price their EVs low enough to wipe out tesla. Just sat in a Mach-E and ready to buy one but can't decide because there are so many other options coming to market now.

There's a whole heap of EVs coming from the established brands and honestly, I would choose them over any Tesla. If the VW camper van becomes reality, oh my oh my. Mach-E looks incredible! Even the Skoda EV looks amazing - it's a SKODA?!

I have been hearing similar arguments for a long time. It used to be "tesla has one tiny factory, just wait until Toyota converts it's many huge factories to electric".

It would be great if the mach-e sold 500k units in 2022, but I would not bet on it.

Important to realize it's not binary. TSLA can be a great company, remain viable for a long time, and also not have a $3T market cap in 4 years. TSLA isn't living in a vacuum, and competitors are catching up. Unfortunately/fortunately for a lot of innovators, the first one to market is not always able to corner the entire market forever.

Additionally, their current market cap is a gift and a curse. It's great they were able to raise more money using their value, but it also draws huge attention from current and possible competitors who let TSLA figure the EV market out. Now competitors can use their respective skillsets to compete where TSLA is weak.

This is all to say that competition heating up and will dampen TSLA's potential valuation. It doesn't mean TSLA is going out of business anytime soon.

It is binary. Does your company exist to accelerate the transition to sustainable energy and transportation or do you have another mission like "delivering shareholder value"?

Tesla's lineup is still great, but other automakers are closing the gap very quickly. And that's with the intentional market segmentation they have to do in order for EVs not to look too attractive compared to their ICE lineup.

Looking into the future, for example Hyundai Ioniq 5, it's not clear how will Tesla compete. Elon factor will only get them so far.

I personally feel like the "Elon Factor" is slowly turning on him as people find him more and more childish and cringy. Would be interested to see how his public perception has changed over the decade.

No, the big automakers had their chance to make a serious commitment to EV and they all failed to deliver. Now they’re playing catch up but Tesla is too big for them to drive out of the market

Kind of like how Android just wiped out Apple right?! I can’t say I understand where all the reflexive hate for Tesla comes from, especially here, but Tesla is a leader for a reason definitely check them out so you understand what the differences are before you buy that MachE

> And lets just DOUBLE our profit margin on electric vehicles LOL. When the competition is getting increasingly fierce

Exactly!

VW doubled it's share price this week after announcing their goals for 2025 [1].

For 2021, they are targeting 1m EV and hybrid vehicles.

VW is "building six battery factories in Europe alone".

[1] https://www.bloomberg.com/news/articles/2021-03-16/vw-eyes-g...

"VW is "building six battery factories in Europe alone"."

Interestingly VW's six factories by 2030 produce totally about as much (240 GWh) as Tesla's one Berlin factory, which is due to start limited battery production in 2023, starting at 100 GWh per year, later ramping up to 200-250 GWh.

That's a significant counterpoint I wasn't aware of, thanks.

Tesla's original "gigafactory" talked a big talk, too, but they only completed 30% of the building. The Tesla Berlin factory is "capable of over 100 GWh per year" with only vague Musk-promises of it going above that over time.

This "analysis" isn't for them to make an investment call.

Its to make people buy into stocks they already have a position in..

It’s better this way than listening advice of people who don’t risk their money.

They're not risking their money. They're risking clients' money.

That's not their money, though. It's the money of their customers who buy their ETFs.

It does make them a biased source of information, which is the original point. Why would they ever publish a pessimistic report about Tesla and risk the stock going down even 0.005%?

Would you go to a doctor who had to pay you if he gave you a cancer diagnosis? How proactive do you think he would be to screen you?

No, it's not. If someone has no stake then they have little incentive to be right or not. And in the long term, it's better for them to try to be right because they can brag about their historical accuracy when making future predictions.

But for people that have some risk in Tesla (this firm's ETF is over 10% TSLA), then they have an incentive to pump the price up, even if it means lying. If they can pump the price they benefit. There is no reason why their advice should be trusted if their advice is toward the direction that obviously benefits them. Now, if someone had 10% of their money long TSLA and they said the price was going to fall, then I would probably trust them because that advice isn't directly benefiting them (or I'd be very suspicious that they had some other scheme going on).

They have a strong financial interest in pumping up Tesla stock, so I don't know if their "analysis" is much trustworthy.

In case people are interested, this video from March 16th gives a good idea of the current state of tesla self-driving: https://www.youtube.com/watch?v=antLneVlxcs

I'm not that knowledgeable about Tesla, from what I got they have a "Tesla Full Self Driving Beta" program (which has a terrible name as it isn't fully-autonomous and requires drivers to take over from time to time).

Edit: I'm not sharing this video to say that their program is good or bad, I don't have a dog in this fight and personally do not care about the topic that much. I thought people here would be interested to see how their program behaves in a somewhat realistic scenario. The result seems to be mixed.

Yeah I've seen that one. It's the edge cases which will take a lot of time to smoothen out. Aside from never being able to notice things like someone walking on the sidewalk with headphones on who looks like he's going to cross the street in front of your silent EV. Or a bicyclist hidden behind a bus etc.

Yes, but this video of two days earlier is also its current state, and it's pretty incredible: https://twitter.com/WholeMarsBlog/status/1370974296730824704...

Cherry-picking best or worst-case scenarios isn't particularly helpful - in terms of plotting likely future scenarios, which is what ARK is doing here, the point is that it's still unfinished but improving pretty darn fast.

I'm not sure how to read your comment. Are you saying that the video I shared is cherry-picking? It looks like a mix of good and bad situations for the self-driving assist, more like a realistic look at how it performs in the real world.

I guess what I'm saying is that as a Tesla owner I don't find this video representative of normal use - in general FSD is very good. The other video on the other hand is much better than my experience of everyday use. Best case or worst case scenarios aren't representative of the "current state", imo.

I think the one thing going for Tesla is early mover advantage - they have figured out what it takes to build EVs at scale and eventually make a profit out of it with a 5 year head-start. In their battery day video, they talk about how they're optimizing every last detail of their tech. They're not just focused on automobile design - they are focused on capital efficiency of their factories. They also have an insane amount of cash to operate at lower margins for an extended period if the market becomes too hot.

The competition is coming but they will probably find it difficult to compete with Tesla on price.

I don't own a car, never have, never will, so take everything with you know what.

"5 year head-start."

I can't see this at work. It seems the VW ID.3 is outselling Tesla Model 3 in some markets (though we need to see when production is ramped up and pre-orders are finished delivering for real number) and looks to be nearly profitable (if you take away the dealership - which VW has hinted they want in the future - from the German car makers VW is the only one that clearly stated they want to copy Tesla by business model and software centricity).

We'll see how the ID.4 starting next week performs in the market.

> The competition is coming but they will probably find it difficult to compete with Tesla on price.

There are plenty of cheaper EVs than Tesla e.g. Leaf, Zoe, Ioniq, Kona.

And there are technically better EVs than Tesla e.g. Porsche Taycan.

And you can argue there are EVs that are as good value e.g. VW ID.3/4.

I love VW and I think they are going to make awesome EVs but saying the Taycan is "technically better" is an outright lie or an unfortunate ignorance.

The drivetrain in the Model 3 is vastly more efficient and elegant in design. The overall systems design is more of the same, more efficient and elegant with simplified wiring harness, less onboard computers and more sophisticated infotainment and drive computers at that.

What the Taycan does do better is feel more like a sports car, has better finishing and likely much better quality control.

But "technically" Tesla is 5-10 years ahead of everyone except maybe Lucid which have been building advanced batteries and drivetrains for Model-E for the last decade.

Taycan is based on an 800V architecture which allows for lower charging temperatures and significantly faster charging speeds.

It's objectively better than anything in a Tesla.

Simply having a higher voltage architecture doesn't make it superior. It makes some aspects better but you need to consider the whole picture and that includes the efficiency of the drivetrain front and center as that determines range per kwh of battery capacity.

It's worth mentioning I consider the Taycan to be a better and more fun car. I just don't agree it's technically superior to the Tesla Model 3 on drivetrain/battery/onboard computer aspects.

All true. But you could argue it's beside the point, because che cheaper ones have other significant drawbacks (e.g. range, no driver-assist), and technically better ones are way more expensive. It's the combination of price-point, range, software and scalability in production that's difficult to achieve - any single one is relatively easy metric to beat Tesla on.

"they have figured out what it takes to build EVs at scale". https://www.goodcarbadcar.net/2020-us-auto-sales-figures-by-...

Tesla really doesnt produce that many cars.

IMO EV is just another car. I would argue it's probably easier to set up a supply chain/factory line for an EV than for a combustion engine. The latter is far more complex, far more moving parts.

EVs seem pretty simple. I would guess "almost anyone" (where anyone means "big engineering company") can build an EV drive train. ICEs seem far more complicated to me (thousands of moving parts and so on). I would not expect "almost anyone" to be able to build an ICE which can last even 100k kilometers.

Where's the Community-Adjusted EBITDA?

This reads like someone who has never used A Tesla’s autopilot or seen the FSD Beta videos from the public Beta test. It can essentially do all the things you are up on your soapbox about already and is improving rapidly.

Seriously, their "bear" case is pretty laughable too. The worst scenario they can imagine is Tesla increasing vehicle production and revenue by 10x and making >$40B/yr in ride hailing revenue (up from $0 today). In less than 4 years?

Regardless of how how sound the case for Tesla is, this is a classic money manager tactic called "talking up your book", just a more modern form of it since they put it on Github. A core part of a money managers' job is marketing. Just recognize this is what they are doing and it's no different than a money manager going on Bloomberg for a hot take or an interview.

Agreed. Cathie Wood's career depends upon this to be true.

In my humble opinion, an investment thesis that requires github in order to be communicated effectively is not a strong one. We're not talking about a backtest of a multifactor model here. It's one stock, one direction, one trade.

That's so dumb. You are taking a very complex phenomenon with billions of variables and simulating it with 34 variable MCMC model to justify what seems like overestimation either way. Where's the risks chapter? How have they factored in the black swan events, such as stock market crash? Or just general bubble bursting regarding such highly valued stock as Tesla?

Billions of variables? Are you serious?

Yes. Such is the real world.

To be fair, idk any money mangers who do billions of variables

> In preparation for its robotaxi service, Tesla could launch a human-driven ride-hail network first, delivering a highly profitable recurring revenue stream and limiting the downside of a failed autonomous service.

How do I short Cathy Woods?

Uber and Lyft still haven’t figured out how to turn a profit and they think not only could Tesla enter this space, they would be able to do it and be immediately profitable.

LOL.

I think ARKK is shortable on most brokers. Knock yourself out.

It’s Cathie Wood. I would not call it “shorting her”, but you can buy puts on the ARK ETFs. There is a rather large market for it that would gladly sell them to you.

How much of Uber and Lyft revenues go to drivers?

It’s not about being right, it’s about exiting and leaving someone else holding the bag

ARK Invest's ARKK ETF is getting beat up pretty bad, so they had to do something to try to keep their customers (Tesla is about 10.5% of ARKK [0]).

0. https://ark-funds.com/wp-content/fundsiteliterature/holdings...

many of their holdings are small and don't have a lot of trading volume, ARK owns a big share of many of these firms. For an ETF (forced selling and buying based on fund flows) the combination of extremely high valuations and low liquidity can become very, very painful.

yeah, they won't be able to sell when they need to... they act like a small-time investor.

nah, they act like many active managers: things seem great as long as things go up and people keep entering the theatre, and then suddenly there's a downturn and there's a tiny door to get out, and the fund is screwed.

See for example Neil Woodford[0]

[0] https://en.wikipedia.org/wiki/Neil_Woodford

they say that they have 40 years of experience... surely they should have went through at least 1 major crash... unless they add up the all the 1-year intern years. I wasn't investing in stocks but I'm 40 years old and I remember 2008. The house I bought back then tripled in value when I sold it.

All current analysis misses the point. Tesla is not just a traditional auto company. Musk is involved with Space-X, which is likely going to be the company that takes humanity interstellar. Additionally, right now there is a Tesla Roadster floating through space which will likely be picked up by aliens in future. This means Musk will probably become a Steve Jobs like deity figure among advanced alien species, allowing Tesla to export a luxury product at high margins throughout the Milky Way. Conservatively assuming only 1 in billion stars with an advanced civilisation, thats still a market of thousands of billions of high income aliens. Stop thinking about traditional metrics such as 'global market share' and then current valuations frankly look too way low.

This is the way!

Let's just make up few number from thin air and lets create 2008 gold rush. Current Tesla P/E is 1,027.86, and current "value" is 628.58B. Valuation that says it worth more than 6 top automakers combined. https://www.thedrive.com/news/38485/at-631b-tesla-is-now-wor...

Just to put everything in perspective Toyota makes 11 million cars per year. Tesla makes 0.5 million. Ok we can say there is future value, batteries and blah blah blah... But actually it "worth" more than top lithium battery makers LG Cham (51,8B) and Panasonic (32B).

So, lets cut the bull** lets just say Tesla will worth $30 Trillion and then quickly sell all stocks, and then buy all automakers and battery producers in the world + and a few techno companies like Microsoft, Apple and Google just for the sake of autopilot development?!

Gross margins and free cash flow yields seem very high here. I don’t see that Tesla has the kind of pricing power to make this a reality. EV competition will surely prevent this from happening?

I heard ARK’s founder talking about genomics the other day, they have a fund that invests in this area. I work in genomics and most of what she said was just buzzword nonsense.

Funny, when I change the numbers to my assumptions I get a 2025 suggested share price of $61.00

That's around where the stock was trading (split-adjusted) when Musk sent his "funding secured" tweet in 2018.

> Autonomous Ride-Hail Revenue (net, billions) of $327 billion by 2025.

> Electric Vehicle Revenue 13x in 5 years

Okay.

I know it is quite common practice, but I find using Monte Carlo methods to predict stock prices to be quite ironic and funny.

Is it common? The problem with so many nondeterministic models is that they bake their assumptions into the results, but gap moves in stock valuation are almost always the result of mistaken assumptions.

I think that your parent is referring to the Casino de Monte-Carlo or the Vegas resort, both gambling places not unlike the stock market investments for some folks. https://en.m.wikipedia.org/wiki/Monte_Carlo_Casino

No competent system developer uses mc to "predict stock prices." None. Monte Carlo is a process for estimating variation in randomized simulations of a system's parameters. It is just one statistical tool for examining simulated trade distributions. On unsampled data it is useful for assessing distributions of performance characteristics. I don't know of one person using mc to try to predict prices however.

Irrespective of how it will play out, I appreciate the analysis from Ark. But I wish they also accounted for "China factor". Given that China is one of the largest growth markets for Tesla and the US-China geo-political landscape is changing to be adversarial, what if China kicks out Tesla entirely? How would that impact this model?

It will f it up completely. China will the largest market for EVs for years to come.

Right now China loves Tesla but one day things may change.

This is an article from today hinting how it may happen.

https://www.scmp.com/news/china/diplomacy/article/3126273/el...

Elon Musk denies Tesla cars are being used for spying in China

Yes, this is incredibly optimistic.

That said.... what were you expecting? This is Ark. Cathie Wood.. TSLA. Yeah, Yeah, PEs are through the roof and skies are falling. I agree. But, when you click to read Ark's TSLA forecasts, you click for outrageous investment theory. I got what I came for.

Side note... If Ark is really this optimistic about Tesla's business performance... they're very pessimistic about Tesla's "multiples," or the stock market's.

In the bull case for 2025, Tesla EV revenue will grow by 15X. And, high margin "Autonomous Ride-Hail Revenue" will is eclipsing EV production revenue.... presumably growing faster too. Tesla's share price grows by only 8X?! How is that possible? Did I misunderstand something?

I was enjoying reading about the ORA Good Cat. An EV by the Great Wall Motors. Designed by a Porsche designer, desirable, retails for about 1/3 of a Tesla. In China.

With a decade, the AI powering autonomous vehicles is going be commiditized in same way as speech recognition or OCR has become commiditized.

And the dominant electric automobile makers will be Chinese.

I have no idea where valuation for Tesla will peak. But in ten years. I am pretty sure Tesla will be valued similarly to any other established car brand (that is P/S P/E will be similar to that of Volkswagen, Ford etc.).

Since almost all the comments are bearish, the bullish price target is probably accurate. Remember their last price target was also ridiculed, and it hit exactly. The entire NASDAQ is in a correction, so citing the current price decline isn't really fair. Tesla has a 10 year head start on the competition in the EV space, optimizing their battery production at scale and heading towards their target of a $25k car. They are also an energy company, scaling up solar and battery storage for homes. Think bigger.

    ARK used a Monte Carlo model with 34 inputs;

What is the impact of 'unknown' variables in 2025 e.g. covid

I always wonder whether they're super bullish on Tesla or just expect high inflation

Both are likely

The "Total EBITDA Margin*" is currently 14%, they expect it to be 31% in the "bear case" and less than that, 30%, in the "bull case". The bear case should be something like 10% margins or even less.

Eh. I think 10% margins would require some monumental fuckups on Telsa's part that I don't think are on the cards. M3/MY are some of the most capital efficient vehicles to build as a result of pushing hard to make use of mega castings, vertically integrated electronics and seat production etc. (i.e little to no outsourcing, no vendor margins to pad into price).

Munroe estimated a 30%+ margin on the M3 and he was pretty anti-Tesla up until that point and had some pretty damn harsh criticisms of the MS.

I'm not long Tesla at these prices (if it was to drop to $400 I would be in again) but I wouldn't be betting on the stock price going to $60.

As with all high flying stocks pay close attention to R&D and stock comps. If Tesla is at the forefront of auto technology why is their R&D all but stalled? It’s laughable.

Well with the current rate of Unicorns going public and raising obscene amounts of money and valuations being somewhat in the WTF levels these predictions sound about right......

What happens to that phenomenon when rates rise and the cost of money increases?

There's certain monied interests that would want to keep the cost of money low enough that they can ride it up before selling, and i'm sure their influence is high.

Even the Feds are saying they'll let inflation run high "for a bit".

Simulations are believed by no one except those who conducted them.

Experimental results are believed by everyone except those who conducted them.

Anonymous

Assuming this will happen, would this make Musk the first trillionaire?

Reply on news.ycombinator.com