TESLA $2500 By 2027

Cathy Wood Bullish

Cathie Wood is unphased by Tesla's Q1 numbers which are not that bad given the economic environment we have these days.

She firmly believes that in a base case scenario, Tesla will hit a price target of $2,000 in 2027 .

Now for their beer case scenario, which they are giving a 25% probability the stock should be close to $1400 by the time.

They are modelling a 25% probability that stock will hit $2500 per share by 2027, If everything they are factoring in goes their way hence their bull case scenario.

They are clearly predicting Elon could be the first trillionaire by 2027, when the stock hit these numbers.

Projected Numbers

Cathy Wood picked Tesla stock very early on, that is why people are taking their projections very seriously.

In their 2027 projections, Tesla will sell close to 20 million cars a year which is in line with Elons publicly stated goal.

Clearly their average selling price will go down to about $26,000, that is where economies of scale will kick in.

A huge jump to $528 billion in automotive sales from $70 billion right now looks achievable, if Tesla remains on track with their growth story.

That will give it a bull case price of $2500 by 2027, a CAGR of 73% and a market cap of close to $7.9 trillion by that time.

Volatile Price

Tesla’s sales and EPS for Q1 2023 were in line with forecasts, but in short term potential worry is decline in their free cash flow and operating margins.

The stock fell about 10% in one day wiping out $51 billion in market cap.

Comparatively, market valuation of it’s biggest American competitors GM and Ford’s is just $47 billion, which is just 1 tenth of Tesla’s $511 billion valuation.

Surely some analysts and long term investors are not excited by Q1 numbers.

That is why some brokerages are maintaining their price target of $150 a share, which shows stock could go down more in short term.

Stock down

Tesla stock tumbled about 10% on Thursday, hitting lows not seen since late January as it’s gross margins dipped below 20%.

Recently Tesla slashed prices multiple times to reignite demand, even Elon told during earnings call that they are not sure where margins will go in short term.

Even Jefferies maintained a Buy rating on Tesla, but they cut price target to $230 from $250 citing shrinking margins as a primary concern.

They are unsure about what focus on near term volumes will have on automotive margins.

Just as a sidenote, they delivered about 423,000 units in the first quarter while producing about 441,000.

Elon Musk - A Rough Week

A rough week for Elon Musk as some institutional shareholders wrote an open letter to company’s board to rein in, an “over-committed” CEO.

They want more independent directors, that can have increased oversight in major decision making.

3 bad news that hit Elon this week are :

First, his Starship rocket exploded midair during it’s first test flight.

Second, Tesla’s Q1 earnings saw decreased margins thus stock lost almost 10%, which erased $13 billion from his net worth.

And Third, Twitter eliminating verified status from some non-paying subscribers and government officials.

Just keep in mind, these are just short term hiccups that has got no bearing on long term growth story for the companies that he runs.

If $1000 Invested

Considering ARK’s projections, if you invest $1000 in Tesla at Today’s price of about $165 you could buy about 6 shares.

With Cathy’s bull case projection of $2500 a share by 2027, that would be about 15X return.

In hindsight, you could have bought about 58 shares had you invested same $1000 at Tesla’s IPO price of $17.

With all the past price volatility, two stock splits of 5:1 and then 3:1, those 58 shares would have turned into about 880 Tesla shares post split, had you stayed invested.

At todays price of $165 a share, those $1,000 investment at IPO price would be worth about $145,200 today.

That is the power of long term investing.

Disclaimer :

As a disclaimer, I’m not a financial advisor please consult one before investing based on your personal financial situation.

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