We will be giving some Ark’s open-sourced Tesla model forecasts that Tesla shares will trade at an expected value of $2,600 by 2029 their bull case is $3,100, and their bear case is $2,000.

Modeled share price outcomes for Tesla, with a scenario mix showing 1% probability bins and an expected value of $2,600 by 2029, according to Ark's open-sourced model

ARK estimates that nearly 90% of Tesla’s enterprise value and earnings will be attributed to the robotaxi business in 2029 while EVs will make up 25% of sales and 10% of earnings.

We will not dive deep into the thesis but will say that their simulation forecasts that there is a 58% probability that the first year of Tesla robotxi commercialization is next year. That seems a little soon, especially with all the regulations that will be needed to pass. If you want to read the publication, click here: https://www.ark-invest.com/articles/valuation-models/arks-tesla-price-target-2029

Aside from that, we will look at the valuation, what does $2,600/share mean?

Currently, Tesla trades at $179, its all-time high is approximately $410 per share (November 2021). From today’s price to the 2029 forecast, Ark believes there is over 1,300% upside in Tesla’s share price. In order to reach that price target, Tesla shares would need to increase 71% per year for five years. Ark’s valuation of Tesla would put its market cap in 2029 at $8.1 trillion. Currently, Apple is the world’s largest company in terms of market capitalization at $3.3 trillion, quite the jump in just a few years. The only way this happens is if Tesla completely revolutionizes travel, energy storage, and the world’s financial system continues to get fueled with fiscal injections and stimulus like it has for the last 15 years.

We do not think this price target is likely but can applaud the people at Ark for putting together a very interesting piece on one of the world’s largest companies, even if we do not own shares in the company.

In other Tesla news, there is a serious fight over the pay package for Elon Musk at Tesla. Some shareholders are up in arms over a proposed pay package that would pay the Founder as much as $56 billion through salary, shares, and options. The pay heads to a shareholder vote on Thursday. Several large investors support the new proposed package, and several investors oppose the increased pay package for Musk.

Here are those who support and oppose the package and what % of Tesla they own:

Support:

  • Baillie Gifford & Co. – asset manager (0.56%)
  • Ron Baron – CEO of Baron Funds (0.54%)
  • Cathie Wood – CEO of Ark (0.16%)
  • Gavin Baker – CIO Atreides Management (0.005%)

Oppose:

  • Norges Bank – Norway sovereign wealth fund (1%)
  • Marcie Frost – CEO California Public Employees Retirement system (0.3%)
  • Chris Ailman – CIO California State Teachers System (0.14%)
  • Brad Lander – Comptroller NYC (0.1%)

Several large individual investors have spoken out in support and opposition to the pay package. It seems this package is pitting asset managers and venture capitalists against pension managers. It will be interesting to see what happens if Musk does not get his way. Many investors have said they will sell their Tesla shares if the package is not passed. This could cause some serious downward pressure for Tesla shares in the coming weeks.

We will be monitoring this and reporting back next week.

MacNicol & Associates Asset Management

June 14, 2024