(Business 2 Community) - Tesla (NYSE: TSLA) stock fell almost 10% yesterday after markets gave a thumbs down to its Q1 2023 earnings. Cathie Wood of ARK Invest meanwhile predicted that the stock can hit $2,000 by 2027 in her base case scenario.
Tesla stock has whipsawed in 2023. While it fell to multi-month lows on the first trading day of the year after the company missed the Q4 delivery report, it rebounded and almost doubled over the next month.
It has since weakened and the Q1 2023 earnings only added fuel to the sell-off as multiple price cuts took a toll on Tesla’s profits with operating margins falling 11.4% in Q1 2023, down from 19.2% in the corresponding quarter last year.
During the earnings call, Musk said that Tesla is prioritizing volume growth over margins. He blamed the Fed’s rate hikes and macroeconomic uncertainty for the slowdown in car sales.
Musk forecast that in the next two decades, ICE (internal combustion engine) would meet the same fate as steam engines.
Tesla’s CEO Elon Musk and Cathie Wood are known to make flamboyant statements though. During Tesla’s earnings call, Musk said that the company might achieve full autonomy this year.
In 2015, Musk predicted full autonomy in three years. Since then, he has been pushing the deadline, and last year during the Q4 2021 earnings call he said that per his “personal guess” TSLA would achieve full autonomy by the end of 2022.
Wood Says Tesla Stock Can Rise to $2,000 by 2026
Musk has made similar comments about robotaxis as well and in 2019 he famously said, “Next year, for sure, we’ll have over 1 million robo-taxis on the road.”
Fast forward to 2023, and we still don’t have Tesla robotaxis.
Meanwhile, Wood sees robotaxis as a key driver for Tesla and said they are “one of the most important investment opportunities of our lifetime.”
Her base case target for TSLA stock is $2,000 with a bear case and bull case target price of $1,400 and $2,500 respectively.
Incidentally, her base case target price would imply a market cap of $5 trillion – which is quite close to Musk’s prediction of the company’s market cap surpassing the combined market caps of Apple and Saudi Aramco.
Previously, she predicted that the stock would rise to $1,500 by 2026 – a price level that Ron Baron – another Tesla bull sees more likely by the end of this decade.
Notably, Tesla is the biggest holding for ARK’s Flagship ARK Innovation ETF accounting for almost 10% of the portfolio.
EV Price War is Hurting TSLA
Tesla has cut car prices in the US six times this year – including twice in April only. The price war initiated by the company is taking a toll on its margins.
After the price cuts, Tesla Model 3 base price is now slightly below $40,000. While it is the cheapest that a TSLA car in the US has ever been, competitors offer models at even lower price points.
In China, BYD is giving a tough fight to Tesla and is the market leader in the country’s NEV (new energy vehicle) market.
Last month, Volkswagen revealed its ID.2all which it intends to sell for around $26,500 by 2025.
Tesla is also working on a low-cost platform which Musk said the company would reveal later this year.
For now, Tesla’s price war is taking a toll on its margins and analysts fear other auto companies might also need to follow suit – some like Ford and Xpeng have already cut EV prices following Tesla’s footsteps.
Not all EV companies meanwhile wish to join the price war and China’s NIO categorically stated that it has no intention of participating in the price war and would instead improve the services to make the production proposition even better.
By Mohit Oberoi
Mohit Oberoi is a freelance finance writer based in India. He has over 15 years of experience in financial markets. He has been writing extensively on global markets for the last eight years and has written over 8,000 articles. Mohit has completed his MBA with finance as a major from…
