Only one stock market sector has escaped losses in 2022: energy. But even that may not last as the price of oil has recently collapsed and is on the brink of giving up its gains for the year. The point is that no investor, regardless of skill level, is immune to poor performance in this tough market.
But none have suffered as much as those focused on technology stocks. That includes Cathie Wood, the head of ARK Investment Management, which oversees seven exchange-traded funds (ETFs), including the flagship ARK Innovation ETF. Wood is the poster child for long-term bets on innovation -- and the losses that come with them -- given the ARK Innovation ETF is down a whopping 60% year to date.
However, like all stock market declines, this one will eventually recover given enough time. The key is to focus on which stocks could produce the greatest returns on the way back up, and Wood has identified one in electric vehicle powerhouse Tesla (TSLA -3.54%). Based on ARK's projections through 2026, Tesla stock could be set for major upside, potentially soaring as high as $1,933 per share.
Electric cars, green energy, and ... robots!
Most investors know Tesla as the largest producer of electric vehicles in the world. While the competition is likely to catch up over time, Tesla is several steps ahead, not just technologically but also in its manufacturing processes, which have allowed it to maintain the highest gross profit margin in the automotive industry.
The company is also a leader in self-driving technology. By 2024, Tesla believes it will deliver a fully autonomous robotaxi with no steering wheel or pedals -- meaning no human operator required. And since that market is estimated to be worth $2.1 trillion by 2030, the stakes are incredibly high. It actually makes up a large piece of Wood's long-term price target for Tesla stock.
But the company's investments in innovation continue to sprawl into other areas of technology. Green energy is one of them with Tesla's solar roof and residential battery storage products in such high demand that it struggles to produce components quickly enough to keep up. One new technology, however, could really supercharge Tesla's business.
At the company's artificial intelligence (AI) day on Sept. 30, it unveiled a new humanoid robot called Optimus. While it's still in development, Tesla CEO Elon Musk told the cheering crowd that Optimus could be a bigger revenue generator than Tesla's electric vehicles in the future with millions of units sold at under $20,000 each.
Optimus has the potential to replace humans in certain areas of manufacturing, for example, which could deliver a significant boost to economic productivity and the bottom line of businesses that deploy the robot.
Tesla should power through this tough economy
Last year, Tesla generated $53.8 billion in revenue, mostly from electric vehicle sales. But it recently doubled its production capacity to two million cars annually thanks to its new gigafactories in Austin and Berlin. The facilities are in the process of scaling up so they may not reach capacity until sometime in 2023, but analysts expect Tesla to generate upwards of $121 billion in revenue that year.
But looking further out into the future, Wood estimates Tesla could generate as much as $999 billion in sales in 2026 from a combination of its electric vehicles and fully autonomous vehicles.
If that sounds like a major leap from here, that's because it is. However, it's supported by recent comments from Musk that suggest Tesla could be producing 20 million cars annually by 2030 from up to 12 new gigafactories. If that were to happen, investors should expect to see Tesla planning to begin construction of these new facilities within the next couple of years -- and back in August, Musk hinted the next location could be revealed before 2022 is over.
Image source: Tesla.
Cathie Wood thinks Tesla stock could soar
Wood is the biggest Tesla bull on Wall Street, at least going by price targets. ARK has laid out three possible scenarios for Tesla stock by 2026: a bear case of $2,900 per share, a neutral case of $4,600 per share, and a bull case of $5,800 per share.
That was prior to Tesla's recent 3-for-1 stock split, so the adjusted targets are $966 per share, $1,533 per share, and $1,933 per share, respectively.
Tesla stock hit a 52-week low of $206.86 in May, and while it has already bounced to $242.40 as of this writing, that still leaves plenty of upside on the table for investors who buy now. In fact, if Wood's bull case comes to fruition, Tesla stock has the potential to rise 697% from here, and if it gets there, that will mark a gain of 834% from its recent 52-week low point.
Interestingly, Tesla's new humanoid robot isn't expected to go on sale until 2027. Since Wood's forecasts only capture the period ending in 2026, any windfall from Optimus could add even further upside to ARK's projections in the long run.
One thing appears certain: Tesla is going to be a much, much larger company in the years to come, and that alone is a good reason to own its stock.
