Year after year, Wall Street thinks the value of it is declining, but Cathie Wood of ARK Invest has a different view.$Tesla (TSLA.US)$On June 12th, Wood's ARK Invest updated Tesla's valuation, and the new target price is $2600 by 2029. This would make Tesla's valuation over $8 trillion, about 27 times ARK Invest's estimated free cash flow of around $300 billion in 2029.

This stunning number represents that Tesla's investment ROI will reach an astonishing 15 times in the next five years, with an average annual ROI of around 72%.

It is indeed an amazing increase, but Tesla's stock has already achieved huge returns in the past. As of June 13th, Tesla's stock has risen about 12 times in the past five years, with an average annual return rate of nearly 65%.

Nobody should be too surprised by this increase. Wood's target prices for Tesla are usually much higher. ARK Invest's target price for Tesla in 2023 is $2000 per share by 2027. This is higher than $1533 in 2022 and $1000 in 2021 (previous target prices were adjusted based on Tesla's stock split). The $2000 target price is by 2026, and the $1000 target price is by 2025.

Target prices usually correspond to a certain date, and the target stock price given by Wall Street usually represents analysts' predictions for the stock price trend in the next 12 months.

Cathie Wood has set more aggressive target prices for Tesla in the past few years than Wall Street.

Wall Street vs. ARK Invest

The average target price for Tesla by analysts summarized by FactSet is about $183 per share, down about $10 from a year ago.

Competition intensifies, interest rates rise and the growth of electric vehicle demand slows, all of which are reasons why Wall Street is more cautious.

These factors seem to have no effect on Wood, who believes that most of Tesla's value comes from the autonomous driving cars that are planned but not yet developed.

Part of ARK Invest's report on Tesla reads:" Our confidence in Tesla's introduction of a self-driving taxi (robotaxi) network in the next five years has been greatly enhanced." ARK Invest cited examples of the upcoming robotaxi event on August 8, the recent free full self-driving tests, and Tesla's FSD entering the Chinese market to enhance its confidence. Tesla's" business model should transition from selling cars as a one-time sale to a recurring revenue model, as each car will become a cash-generating machine driven by artificial intelligence."

Wood's target price for Tesla is $350 per share if the self-driving car does not materialize. This target price will bring investors an average annual return of about 15% by 2029. But ARK Invest said that this situation "is unlikely."

ARK Invest expects that Tesla's electric vehicle sales will reach 5.8 million units by 2029, and the automotive business is expected to generate about 30% of operating margin (about four times the industry average). The pre-tax profit of the self-driving taxi business in 2029 is expected to be about $241 billion.

This does not include any bullish news brought by Tesla's humanoid robot Optimus.

This does not yet include any potential bullish news brought by Tesla's humanoid robot Optimus.

Edited by Jeffrey