Cathie Wood has become something of a rock star with investors. The founder and CEO of ARK Investment Management has developed a reputation for making bold calls on emerging technologies, a strategy that has paid off handsomely for ARK's exchange-traded funds, which thrashed the returns of the overall market last year.
Wood has risen to prominence not only for her stock picking prowess, but also because she isn't afraid to make big, seemingly outlandish calls that have eventually come true. Some investors might place Wood's most recent call in that category.
Over the weekend, ARK Invest released its latest five-year price target on Tesla (TSLA -3.40%), which turned heads. Wood expects shares of the electric vehicle (EV) maker to climb more than 350% from Friday's closing price to a massive $3,000 by 2025, pushing the company's market cap to roughly $1.5 trillion. While that might seem heady, it's not as outrageous as it might appear at first blush.
Image source: Getty Images.
A history of bold calls
Wood hasn't shied away from making pie-in-the-sky calls. Back in 2018, she suggested that Tesla shares, which were trading at $300, would surge to $4,000 by 2023, representing potential gains of about 1,200%. That prediction came to fruition a full two years ahead of schedule, when Tesla shares topped a split-adjusted price of $800 early this year after a much celebrated 5:1 stock split in late 2020.
ARK Invest was also an early proponent of Bitcoin (BTC 0.41%), buying and recommending the cryptocurrency when it was just $250. For context, Bitcoin is currently priced at north of $54,000. While the company has sold a portion of its Bitcoin investment, ARK Next Generation Internet (ARKW 1.59%) ETF still holds a sizable 6% of funds under management in Grayscale Bitcoin Trust (GBTC 3.40%), the first publicly traded security investing solely in Bitcoin. That stake is currently valued at roughly $429 million.
It's also worth noting that Wood's calls on disruptive technology have been prescient. That's evident in the results of ARK Investment Management's five flagship exchange-traded funds, which crushed the returns of the broader market in 2020 with each gaining more than 100% over the course of the year. With results of that caliber, it's hard not to pay heed.
Wood isn't alone
Wood isn't the only analyst with such a bullish call on Tesla. Earlier this year, Wedbush Securities analyst Daniel Ives made a similar prognostication. In an interview in January, Ives said, "In a year or two from now, we're not just looking at $1 trillion for Tesla, but in a couple of years this could be a company that could start to approach $1.5 trillion to $2 trillion market valuation."
Ives is among the most bullish analysts on Wall Street when it comes to Tesla. He estimates that the company could deliver as many as 800,000 vehicles this year, up more than 60% from the 499,550 Tesla delivered last year.
Image source: Tesla.
More worlds to conquer
Tesla has been a massive success in China over the past several years, with sales in the country more than doubling in 2020, and accounting for 21% of total sales. Some investors fear those days of heady growth could be in jeopardy. The Chinese government announced that it would restrict the use of Tesla vehicles by some military personnel and certain employees of state-owned companies, citing the vehicles' always-on cameras and the potential for national security leaks. However, this will only affect a small subset of sales in the country and China isn't Tesla's only growth market.
The company is planning to set up a manufacturing facility in India, according to regulatory filings. Tesla plans to build an EV plant in the southern part of the country. "The U.S. firm Tesla will be opening an electric car manufacturing unit in Karnataka," the local government confirmed in a brief statement.
By establishing a production facility in India, Tesla is using the same playbook that helped it become so successful in China. India has population of more than 1.3 billion people and it's estimated that 80% of its households will be middle class by 2030, up from 50% today. By manufacturing its popular sedans in India, lower production costs will translate to more buyers in the world's second-most populous country.
The smart money is on Musk
Given Elon Musk's history of defying the odds and Wood's track record of identifying winners, it's hard to bet against the EV maker's future potential. While only time will tell, the idea of Tesla gaining 350% over the coming five years isn't as far-fetched as some might think -- especially considering the stock has gained 662% over the past year alone.
