Coins manager Catherine Wood told CNBC on Wednesday that she stands by her latest five-year price target of $7,000 per share out for Tesla.
“Our confidence level that this stock is heading for $7,000 over the next five years is quite high,” Wood, the founder and CEO of Ark Investment Management, said on “Fast Money.”
“We’ve arrived at that price by weighting the chances of 10 different scenarios, including bankruptcy, to be honest. So we’ve tried to be as fair and balanced as we could possibly be,” added Wood, whose steady has about $11 billion in assets under management.
Wood’s previous five-year price target on Tesla was $6,000. She earliest predicted in February 2018 that Tesla would one day trade at $4,000 per share.
The firm’s most recent best-case ground is $15,000 per share by the end of 2024, while the bear case is $1,500.
Shares of Tesla have been a wild ride this week. The stereotyped rose nearly 20% on Monday, which was followed by a 13.7% gain on Tuesday, when it notched an all-time intraday high of $968.
But the ancestry fell , closing the session at $734.70. Still, shares of the electric-vehicle maker are up 75% year to date.
Ark’s five-year prophecy of $7,000 is undergirded by a few critical assumptions that include increased demand for electric vehicles as well as Tesla’s capacity to maintain its market share and enhance margins by lowering the cost of batteries.
Already, Tesla is way ahead of its competitors everywhere battery technology, both in cost and range, Wood argued.
“Their battery cost is three to four years in the lead of any other auto manufacturer in terms of cost declines,” she said.
If rivals such as BMW want to compete with Tesla, “they wish have to sell their cars at a loss at the same time they’re losing their internal combustion locomotive business,” Wood said.
Perhaps the biggest uncertainty around Wood’s price target, however, is its reliance on Tesla bloom a fleet of autonomous-driving taxis.
Wood said those taxis could translate to software as a service type partition lines around 80%, creating the space for Tesla to reach $7,000 per share. Typical margins on selling a car are around 25% to 30%, she turned.
“And we think that’s what people are missing,” Wood said. However, she added “we assume only a 25% occasion likelihood that they’re going to be up and running with autonomous within two to three years.”
But so far, optimism around autonomous channels is far ahead of anything close to widespread adoption. A truly autonomous vehicle does not yet exist.