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Electric car maker Tesla has stunned Wall Street by its growth over the last year crushing down street expectations comfortably. Analysts have now turned bullish over the company and expect its to touch trillion-dollar valuations in the next five years while TSLA stock may reach $7000 by 2024.
Elon Musk‘s Tesla Inc. is on a roll as the company’s stock price has surged nearly 100% in the last three months. Last Wednesday, January 29, Tesla released its Q4 2019 earnings taking Wall Street by a big surprise.
Beating the analysts’ expectations, Tesla registered total sales of $7.38 billion against the street projections of $7.02 billion. The electric car maker posted an EPS of $2.14 against the expected $1.71. The company said that its Model 3 deliveries were up 45% YoY and it expects to sell over 500,000 units this year in 2020.
Tesla also becomes the first American automaker to hit $100 billion valuation beating old players like General Motors and Ford. It is obvious that Elon Musk’s vision and conviction has managed to trump all the shorters and pessimists in the market.
Tesla Stock to Touch $7000 by 2024
A thematic investment fund – ARK Investment Management – has unveiled its new price target for Tesla Inc. After the Q4 2019 results. The investment fund has made three strong predictions for Tesla’s stock price by 2024.
It notes that there’s a 50% probability of Tesla stock hitting $7000 price by 2024, as per the existing situation. This could probably put Tesla in the bracket of companies with trillion-dollar valuations. In the case of a bear market, the fund expects a 25% probability for the stock to stay at $1500. Furthermore, in the case of a bull market, there’s remaining 25% probability that the stock price will hit $15,000.
Besides, ARK Investments also explained its three major considerations behind these price targets. They are:
- Gross margins to approach 40%, in line with Wright’s Law.
- Capital efficiency improvement with increased production scale.
- Evolution of autonomous capabilities and penetration of autonomous taxi service.
ARK Investments also assume that Tesla issues equity capital and debt to scale production. Moreover, Tesla is also likely to leverage the first-mover advantage as per the fund. The investment fund wrote:
“In the fourth quarter of 2019, Tesla reported auto gross margins of 20.9% excluding regulatory credits. Based on Wright’s Law and expressed in ARK’s model, Tesla’s auto gross margins could approach 40% in 2024, though they are unlikely to increase in a straight line as new models launch and production scales.”
Multi-Transactional Model and Exponential Growth
Additionally, ARK Investments also states that Tesla has got all the technological capabilities to develop a multi-transactional business model. The report states:
“Tesla could set rates comparable to the $2.50 per mile that Uber and Lyft charge today, dropping them to $1 per mile in 2023. We model that Tesla will take a 50% cut of gross revenues from autonomous taxi networks, much higher than the 20-30% cut that Uber and Lyft enjoy today”.
Catherine Wood, CEO of ARK Invest, said that Tesla has set the trend of exponential growth in the auto industry never seen before. She said:
“This is an exponential growth company. We’ve lived in a linear growth world for so long. With the law of large numbers pulling growth rates — this is a prime example of exponential growth”.
At the time of writing this story, Tesla stock price is trading at $650 with a $117 billion market cap. On Sunday, Tesla CEO Elon Musk tweeted that he will be holding a hackathon in just four weeks.
Tesla will hold a super fun AI party/hackathon at my house with the Tesla AI/autopilot team in about four weeks. Invitations going out soon.
— Elon Musk (@elonmusk) February 2, 2020
Although Tesla is heavily invested in AI technology, Elon Musk has voiced his concerns several times in the past. He said that AI technology will become so powerful that it will “operate outside of human control”. Musk said that “It’s going to be very tempting to use AI as a weapon. It will be used as a weapon. The on-ramp to serious AI will be more humans using it against each other. That will be the danger.”